India has one of the largest workforces in the world: With nearly 500 million people of working age, the domestic labor market is second only to China's and far bigger than those of the United States and the EU.
India also has a much younger population, with an average age of 26.8 years. Tens of millions of students graduate from colleges across the country every year, entering the workforce.
But the South Asian nation lags behind many of its peers when it comes to imparting skills needed for youth to become employable.
Fewer than half of India's graduates were employable, according to a study released in February.
The India Skills Report 2021 found that about 45.9% of young people would be considered employable. The number was about 46.2% in 2020 and 47.4% in 2019.
India's unemployment rate reached an all-time high in 2020. There were several factors responsible for this, including the coronavirus pandemic-induced lockdown.
Key obstacles to a skilled workforce
Sarthi Acharya, an economist and a professor at the New Delhi-based Institute for Human Development, told DW that there are multiple reasons for this dearth of skills among Indian graduates.
"One of the key problems is that our best-trained minds don't stay in our country: They go abroad," Acharya said, referring to the "brain drain" or the mass migration of skilled labor from developing countries such as India.
The problem is even more acute in technical fields. For example, the 2019 National Employability Report for Engineers found that about 80% of Indian engineers did not possess the skills needed to meet the demands of their employers.
"We have a very large number of private engineering colleges that don't teach anything, and are run mainly by politicians," Acharya said. "They don't teach anything. The private engineering colleges, barring except maybe one or two, are quite frankly pathetic."
Another part of the problem, Acharya said, is that people in technical fields simply aren't compensated well enough.
"India is the only country I have seen where immediately after graduation, an engineering student would go for an MBA to get into marketing or management," Acharya said, citing the massive pay scales of top business school graduates.
"The organizational structure at most places is such that people in nontechnical areas are much better compensated," Acharya said. "These are people like marketing manager, sales manager or human resources professional, who get paid much more than the shop floor engineers."
Severe costs for economy and society
The lack of a highly skilled labor force has major implications for India's economy and society.
"Unemployability is high," Acharya said. "Inequality is rising in the country, as is rural and urban distress. Migration is also on the rise, real estate prices have collapsed, expenditure is rising, and wages are stagnant — and they have been so for a while now."
"We have a lack of quality engineers and doctors. We may have a lot of degree holders, but that's about it," he said.
In 2015, Prime Minister Narendra Modi in 2015 launched Skill India, a government program intended to train more than 400 million people by 2022. The program's efficacy, however, has been questioned by experts over the past few years.
Upskilling to reap benefits
A World Economic Forum report in January showed that investment in upskilling could potentially boost the global economy by $6.5 trillion (€5.45 trillion) by 2030, and India's economy by $570 billion.
India, according to the report, had the second-highest additional employment potential through upskilling. It could add 2.3 million jobs by 2030, second only to the US's 2.7 million jobs.
"In order to meet the skills deficit challenges, India should consider a lifelong learning ecosystem for its workforce," Dagmar Walter, the director of the International Labor Organization's Decent Work Technical Support Team for South Asia, told DW.
"Learning should become an integral part of economic, fiscal, social, and labor market policies and programs," Walter said. "All individuals should have access to and benefit from the skill development opportunities to be able to adapt with the constantly evolving world of work."
Walter also called for identifying gaps in skills and future requirements, which could be done in consultation with key stakeholders.
"It is recommended to have the national qualification framework in place to support a transition from vocational training to formal education and vice versa," Walter said.
"Supporting the skill recognition, training of the current workforce, and aligning the skill development program with the anticipated future skills could be the best way to contribute to filling the skills deficit," she added.