India's education crisis: Overqualified yet underqualified

India's education system is producing people who are simultaneously overqualified and underqualified. It has failed to keep pace with the labour market, and even more so with changing demographics. So, the workforce we train today must do three jobs:

Fill formal jobs that employers are struggling to fill.

Equip millions for self-employment and informal work.


Prepare for the needs of an ageing society.

Periodic Labour Force Survey (PLFS) and Economic Survey data tells us that India's population aged between 15 and 29 numbers 307 mn. Of these, 166 mn are outside the labour force. Of the remaining 141 mn in the labour market, 14 mn are unemployed and 127 million are employed. Yet, only 15 mn - roughly 1 in 8 - hold regular salaried jobs with contracts and social security. The remaining 112 mn work without the security, or career progression associated with formal employment.

Graduates face 22.7% unemployment, nearly 10x than those without secondary education. Which explains why roughly 20 lakh candidates competed for 1,700 government posts in 2024, about 170 applicants per vacancy. Yet, employers across sectors cannot find qualified people. Both realities coexist.

India has experienced strong GDP growth since 2005. Yet, employment has stagnated. At the same time, formal sectors show massive, documented shortages. How does this happen? India's higher education system evolved around 1990s aspirations - a degree as gateway to salaried employment. But today's economy needs technicians, caregivers, entrepreneurs, AI specialists and skilled tradespeople alongside graduates.

Healthcare needs 2 mn nurses, 5,70,000 doctors, and healthcare support workers including general duty assistants, emergency medical technicians and home health aides (shortages across 104 districts). Education needs 2.4 mn teachers.

Construction and energy face persistent shortages of skilled trades. Tech needs AI engineers and semiconductor specialists, with around 39,000 cybersecurity roles difficult to fill. Logistics reports shortages of 2-4 lakh truck drivers. These are not hypothetical jobs of the future. Most require formal training, apprenticeships, certifications or technical education.

But there is another reality. Most employed young Indians - 112 mn of them - work outside the formal sector, in self-employment, gig work, family businesses and MSMEs. They need a different set of capabilities: entrepreneurship, financial literacy, customer management, digital tools and problem-solving. The education system prepares too few young people for either reality.

Demographics are shifting. The current cohort of 307 mn youngsters is India's last large working-age population before the curve flattens. Within 20 yrs, India's population will age significantly. By the late 2030s, an ageing population will fundamentally change composition of labour demand. Care work, geriatric medicine, rehabilitation, assisted living and home healthcare will move from margins of the economy to its mainstream.

The current youth cohort must be trained now - not just for the jobs that exist today but for the economy that is emerging. The window to do this differently is closing.

Fill formal sector skill gaps Priority sectors - healthcare, construction, energy, technology, logistics - have documented shortages with real economic consequences. These urgently need rigorous, industry-linked training: apprenticeships, technical certifications, on-the-job training partnerships with employers.

Equip the informal workforce 7   in 8 persons will work in informal sectors. They need completely different preparation: business fundamentals, financial literacy, how to manage cash flow and pricing, customer service skills, digital tools for operations, problem-solving. Not degrees but practical capability to build and sustain an enterprise.

Anticipate tomorrow's labour market Over the coming two decades, shortages will have economic impacts. Very high-impact occupations like nurses and elder-care workers, doctors, teachers, AI engineers and data scientists, and semiconductor engineers will shape the country's long-term productivity, innovation capacity, human capital and ability to adapt to an ageing population.

High-impact occupations like skilled construction workers, electricians and RE technicians, logistics professionals and truck drivers, and cybersecurity specialists are critical enablers of infrastructure, industrial growth, energy transition and the digital economy.

Until we split education into these three distinct tracks, we will keep graduating people unprepared for the economy they enter.

We have one cohort to get this right, one demographic window, one chance to build an education system that prepares people not for the jobs that existed 20 yrs ago but for the economy that is actually emerging. The debate has focused for years on whether India is creating enough jobs. That remains important. But the more urgent question is whether we are preparing people for the economy they will enter.

The choices we make over the next decade will determine whether India's final great youth cohort becomes the foundation of our next phase of growth.