India’s higher education sector, particularly in engineering and management, is at a critical juncture. While the country produces more engineers and MBA graduates annually than the United States and China combined—approximately 15 lakh engineers and 3-5 lakh MBA graduates—several systemic issues undermine the value and employability of these degrees. In this article we explore the complex interplay between education, employability, and job creation, advocating for a renewed focus on skill development in higher education in India to address these challenges.
Historical and Structural Challenges
Since independence, India’s challenge has not been unemployment per se, but employed poverty, where individuals remain poor despite working. The lack of high-wage, non-farm employment opportunities has been exacerbated by historical missteps, including overreliance on welfarism and inadequate attention to skill development. Today, this legacy manifests in a misalignment between educational outcomes and market demands.
The overproduction of graduates relative to high-quality job opportunities remains a significant challenge, particularly at lesser-known colleges. Employability gaps persist, with reports indicating that many graduates lack the skills demanded by the industry, forcing companies to invest in extensive training programs
For instance, outside India’s top 20 MBA and engineering colleges, only a fraction of students—24% of MBA graduates and 45% per cent of graduates are deemed employable. Reports suggest that only 10% of engineering graduates secure jobs each year. The disconnect between what students expect from their education and the actual job outcomes has resulted in poor returns on investment for students and inefficient hiring processes for employers.
Shakeout in Engineering and MBA Colleges
The overcapacity in engineering and management education—marked by 30% of seats going unfilled—reflects a systemic mismatch between supply and demand. This glut, however, has a silver lining. It is forcing institutions to reprice their offerings, improve quality, or exit the market. Capitation fees have decreased significantly, annual fees are stabilizing, and colleges are investing more in faculty and learning outcomes. Yet, some underperforming institutions, such as IIPM, are experiencing drastic reductions in student numbers, highlighting the sector’s need for quality over quantity.
However, these changes pose challenges. Declining capacity could hinder India’s target of achieving a 30% gross enrollment ratio in higher education. It could also impact education loans, which have grown by 1,000% in the last decade, and reduce domestic consumption due to lower graduate salaries. Policymakers must navigate these complexities carefully to sustain both educational expansion and quality improvement.
Role of Skill Development in Bridging the Gap
Skill development in higher education is critical to bridging the gap between education and employability. Employers increasingly seek candidates with practical skills, adaptability, and the ability to contribute immediately to their organizations. Yet, fresh graduates often lack these attributes, leading to higher hiring costs and lower productivity. The recent budget has made strides in addressing these challenges by promoting internships and apprenticeships.
Internships provide students with hands-on experience, allowing them to “learn by doing.” Flexible delivery mechanisms, modular qualifications, and strong signalling from reputed employers further enhance their value. For example, completing an internship with a company like HDFC not only adds credibility to a resume but also provides invaluable exposure to real-world challenges.
Recommendations for Stakeholders
To ensure that India’s young workforce is adequately prepared for the future, various stakeholders must act decisively:
- Students:
- Recognize that not all colleges and degrees offer equal value.
- Complement formal education with soft skills, technical training, and internships.
- Focus on gaining 3–5 years of work experience after an undergraduate degree before pursuing an MBA.
- Master English as a critical skill for employability.
- Employers:
- Integrate internships and apprenticeships into recruitment pipelines to promote the concept of “learning by doing”.
- Collaborate with educational institutions to ensure curricula align with industry needs.
- Leveraging corporate social responsibility (CSR) funds to adopt skilling programs
- Policymakers:
- Reform employment exchanges to improve their efficiency and outreach.
- Encourage foreign universities to establish campuses in India.
- Expand apprenticeship programs, taking inspiration from countries like Germany and China.
- Energize the National Educational Qualification Framework to bridge the gap between vocational and higher education.
- Promote flexible delivery mechanisms, modular qualifications, and strong signalling value from reputed employers making internships an effective bridge between education and employment.
- Promote community colleges and associate degree programs to enhance accessibility and flexibility.
The Path to Sustainable Growth
India must address the intertwined challenges of education and employability to unlock the potential of its young population. High-wage, formal employment opportunities are the cornerstone of this effort. Skill development within higher education, supported by internships, apprenticeships, and policy reforms, offers a sustainable path forward.
As India progresses, it must balance the dual imperatives of expanding access to education and ensuring its quality. Nothing transforms a student’s life more profoundly than their first formal, non-farm job. Skill development, thus, becomes the renewable energy that powers not just individual prosperity but also national growth.
