India stands at a critical juncture in its economic development, with a workforce of nearly 56.5 crore and a youth population that is both a tremendous asset and a formidable challenge. Despite significant progress in various sectors, employability remains a daunting issue, with a staggering portion of the youth lacking the skills needed for a modern economy. According to the Economic Survey 2024, only 51.25% of the youth are deemed employable, highlighting a persistent skills gap that must be urgently addressed. As the nation strives to harness its demographic dividend, the barriers to youth employability and apprenticeship growth need focused attention and strategic intervention.
Current State of Employment in India: Employability Challenges and Opportunities
India’s workforce is nearly 56.5 crore, with more than 45% employed in agriculture, 11.4% in manufacturing, 28.9% in services, and 13.0% in construction. Despite these vast numbers, the issue of employability remains a pressing concern. Sixty-five percent of India’s fast-growing population is under 35, and many lack the skills needed by a modern economy. Estimates from the Economic Survey 2024 indicate that about 51.25% of the youth are deemed employable. In other words, about one in two are not readily employable, although this percentage has improved from around 34% to 51.3% in the last decade. This improvement underscores the potential for further progress if the right measures are taken to address the underlying barriers to employability skills.
Barriers to Youth Employability and Apprenticeship Growth
The rapid advancement of Artificial Intelligence (AI) and other technologies in various sectors presents a significant challenge to youth employability. Employers need to balance deploying technology and labor to maximize collective welfare. Additionally, many regulatory chokeholds, such as those related to land use, building codes and restrictions on sectors and hours open to women’s employment, hinder employment generation. Releasing these restrictions could boost employment and raise the women’s labor force participation rate.
Moreover, there are significant barriers to the growth of Apprenticeships in India. The lack of coordination between educational institutions and industry, inadequate infrastructure and gaps in the regulatory framework are major obstacles. The negative perception of vocational training as being inferior to academic education further compounds the issue. The National Apprenticeship Promotion Scheme 2.0 has set ambitious targets, but actual enrollment and completion rates have been lower than expected. Less than 50% of apprentices engaged have completed their training, and there is insufficient information on the final employment outcomes for these trainees. Only around 47,000 of the 2.21 lakh registered establishments have active apprenticeship programs, indicating a dire need to enhance employer interest in apprenticeships. Addressing these barriers is crucial for enhancing employability skills and improving youth employability.
Skill Development and Employment Initiatives: Bridging the Gap
Recognizing these challenges, the government has undertaken numerous initiatives to address the skills gap and improve employability through the ‘Skill India’ mission. According to the Periodic Labour Force Survey (PLFS), the youth (age 15-29 years) unemployment rate declined from 17.8% in 2017-18 to 10% in 2022-23, while other indicators have also improved over time. From a gender perspective, the female labor force participation rate (FLFPR) has been rising for six years. The rural FLFPR has witnessed a steep rise of 16.9 percentage points between 2017-18 and 2022-23, indicating an increasing contribution of women to rural production. These positive trends highlight the potential impact of targeted skill development and employment initiatives on enhancing employability skills.
Budget Initiatives for Employment and Skilling
This budget’s emphasis on skill development and job creation is a game-changer for India’s employment outlook, especially with the centre focusing on employment, skilling, and MSMEs. With over 4 crore jobs for youth set to be created over five years under five schemes with an outlay of ₹2 lakh crore, the government’s initiative is poised to transform the workforce. A provision of ₹1.48 lakh crore has been made for education, employment and skilling, highlighting a robust commitment to addressing the skills gap and improving employability.
The introduction of a new central scheme to skill 20 lakh youth over a five-year period is particularly noteworthy. By focusing on enrollment in the EPFO and recognizing first-time employees, this scheme aims to provide essential support to newcomers in the job market. First-time employees will receive one month’s wage upon joining the workforce in all formal sectors. This will be facilitated through a Direct Benefit Transfer (DBT) of one month’s salary, up to ₹15,000, disbursed in three installments. This initiative, applicable to those earning up to ₹1 lakh per month, is expected to benefit 2.1 lakh youths. By aligning educational outcomes with industry needs, the budget ensures that the youth are equipped with the relevant skills demanded by the market, thus enhancing their employability and career prospects. This not only empowers the youth but also provides industries with a steady stream of well-trained, competent employees, driving productivity and growth.
Enhancing Employability Skills
Apprenticeships offer a viable solution to bridging the gap between education and employment. By integrating structured on-the-job training with classroom education, apprenticeships provide practical skills that are directly applicable to industry needs. The government’s focus on recalibrating the apprenticeship framework to provide flexibility and negotiability in work hours, compensation and disengagement is a step in the right direction. Linking skill development programs with production-linked incentive schemes and employment-linked incentive schemes in high-growth potential sectors like toys, apparel, tourism, logistics, textiles, and leather can significantly boost apprenticeship growth.
The Way Forward
These measures will have a significant impact on skilling, employment, and job creation. By encouraging job creation in the manufacturing sector through a scheme that links to the employment of first-time employees, the budget addresses the essential need for fresh talent in this vital industry. This comprehensive approach not only equips the youth with necessary employability skills but also provides them with financial support as they transition into formal employment. In addition, the focus on labor-intensive MSMEs, via the continuation of bank credit to MSMEs during their stress period and increasing the limit of Mudra loans from ₹10 lakh to ₹20 lakh, underscores the critical importance this sector will play in driving employment and growth.
This dual focus on skilling and financial assistance will help bridge the gap between education and employability, making the workforce more competitive and resilient. Furthermore, the substantial financial outlay underscores the government’s commitment to long-term economic growth and stability. By fostering a well-skilled, employable, and financially supported workforce, these initiatives will drive productivity, innovation, and overall economic development, positioning India as a global leader.
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