Employability and job shortages have long cast doubt on India’s ability to realise its much-vaunted demographic dividend. A new report by Azim Premji University adds to these concerns, flagging a growing mismatch between aspirations and economic realities. India is projected to have a working-age population of over one billion by 2030. However, according to the State of Working India 2026 report, the share of this cohort is likely to begin declining from 2030, signalling that the window to harness this advantage may be narrower than previously assumed. This shift is expected to coincide with a rise in unemployed graduates, particularly among the young. Although the demographic dividend is expected to last until 2055, it will be of limited value if younger cohorts are forced into low-skill work.
The report suggests this trend is already under way, with low levels of permanent, salaried and white-collar employment among graduates. Consider this: fewer than 7% of male graduates were able to secure a permanent salaried job within a year of graduating as of 2023. These findings are especially concerning given a labour market facing headwinds from artificial intelligence and automation, whose impact on entry-level roles is increasingly visible and likely to intensify in the coming years. The shortage of salaried employment has been building over the past decade. Economists note that since the early 2010s, the number of young people entering the labour force has risen steadily, even as job creation has slowed.
The study acknowledges progress in bridging educational gaps of earlier decades. Gross enrolment ratios in higher education are broadly in line with India’s stage of development, and socioeconomic barriers—across gender and caste—have narrowed to some extent. Yet, despite rising overall enrolment, the share of young men in education has fallen from 38% in 2017 to 34% in the last quarter of 2024. A key reason is financial pressure, with many forced to support household incomes, often at the cost of completing their education. The government has sought to boost employability through initiatives such as the Prime Minister Internship Scheme, but it has struggled to attract applicants, with concerns ranging from low stipends to logistical constraints.
Policy priorities must centre on expanding salaried employment opportunities. This includes improving the absorption of women graduates. A TeamLease report earlier this year noted that only about one-third are considered employable, despite a sharp rise in women’s participation in higher education. More broadly, unless structural divides are addressed, India risks not only missing an economic opportunity but also facing social strains that could deepen inequality. It is important to reverse trends such as the rising share of students from poorer households in tertiary education, alongside the continued dominance of those from more affluent backgrounds in professional courses such as engineering and medicine.
The rapid expansion of vocational training institutes since the 2010s—driven largely by private industrial training institutes—has not translated into better employment outcomes, largely due to concerns over quality and weak industry linkages. This has contributed to a persistent skills gap that undermines India’s manufacturing ambitions. Historically, China moved ahead with a broad-based approach to vocational training and basic education, while India focused more on elite higher education. Bridging this imbalance is essential if the goals of the 2020 National Education Policy, particularly improving employability, are to move beyond intent and deliver measurable outcomes.