Employment and Skills in India: Bridging the Gap

Introduction
 

India's labor market is experiencing a paradox: while employment opportunities are on the rise, real wage growth has not kept pace with inflation. This disparity underscores structural challenges in job creation, wage stagnation, and skill development. The Periodic Labour Force Survey (PLFS) Annual Report 2023-24 indicates improvements in employment metrics; however, aligning skill development with industry demands remains crucial for enhancing productivity and real wages.
 

This article examines two critical aspects:
 

1. Employment Trends and Challenges
2. Skill Development and Its Role in Economic Growth

Employment Growth Trends in India

According to the latest PLFS Annual Report (2023-24) :

• Worker-Population Ratio (WPR): Increased to 58.2% in 2023-24 from 56.0% in 2022-23, reflecting improved employment generation relative to population growth.​
• Labour Force Participation Rate (LFPR): Rose significantly to 60.1% in 2023-24 from 57.9% in the previous year, indicating increased workforce engagement.​
• Unemployment Rate (UR): Remained steady at 3.2%, reflecting stable job absorption rates in the economy.
   

These figures confirm robust employment growth, however, wage stagnation continues to limit economic progress for many workers.
​

Wage Growth vs. Inflation: The Real Challenge
 

Despite positive employment data, real wage growth for regular salaried employees has remained largely stagnant, failing to match inflation rates:
 

• Casual workers: Have witnessed improvements, with real wages increasing, positively impacting their economic stability.​
• Regular salaried employees: Face stagnant wages, diminishing their purchasing power and negatively impacting their quality of life.
  ​

Key factors behind wage stagnation include:
 

• Low productivity: Due to insufficient skill training.​
• Service-driven and gig-based jobs: : Informal jobs like ride-sharing and freelancing make it harder to compare wages with traditional sectors like manufacturing, slowing wage growth in formal jobs.
• Supply-chain inefficiencies: Poor infrastructure increases production costs, leaving less room for wage increases. Better supply chains could lower costs and improve wages.
   

Key Government Initiatives for Employment Growth
 

• Zero Poverty Program: Launched to eradicate poverty by providing employment opportunities. 
• Namo Drone Didi Scheme: Initiated in November 2023, this scheme empowers women by providing drone operation training, enhancing their employment prospects in agriculture and related sectors.
• Mera Yuva Bharat (MY Bharat): Established in October 2023, this platform aims to provide equitable access to opportunities for youth development, enabling them to contribute to the vision of a developed India by 2047. ​
• PM Mudra Yojana: Provides micro-credit to promote entrepreneurship, significantly enhancing employment opportunities. As of January 2024, over 40 crore loans worth approximately ₹24 lakh crore have been disbursed under this scheme.
• Production-Linked Incentive (PLI) Scheme: Offers incentives worth ₹1.97 lakh crore across sectors like electronics, textiles, and pharmaceuticals, aiming to generate approximately 6 million new jobs over the next five years (2023-28).
• Startup India & Standup India Initiatives: Foster entrepreneurship through startup incubation, funding, and support, significantly enhancing job creation potential. Over 1 lakh startups have registered under Startup India as of early 2024.
   

Skill Development: A Key Driver for Wage Growth
 

Importance of Skill Development
 

Skill development is pivotal for improving workforce productivity, employability, and overall economic growth. According to NITI Aayog member Arvind Virmani, effective skilling directly leads to:
​

• Increased productivity, leading to higher real wages.
• Enhanced employability, reducing unemployment and underemployment.

• Sustainable economic growth through a skilled workforce.

India faces significant challenges in skill development, primarily:​

• Skills Mismatch: Many job seekers lack relevant technical and vocational skills.​
• Gaps in the quality of education and practical training: At all educational levels.

 

Data on Skill Gaps and Education Levels
 

Recent reports highlight pressing concerns regarding skill gaps:
 

• India Skills Report 2025: Indicates that only 47.2% of Indian graduates possess employable skills, reflecting a serious mismatch between educational outcomes and market needs.​
• Skill India Mission: Since its inception in 2015, it has trained over 15 million youth; however, only about 4.7% of India's workforce is formally skilled, compared to 52% in the USA and 75% in Germany.
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These gaps significantly hinder India's potential to transition into a high-income, high-wage economy.
 

Government Initiatives for Skill Development
 

• Pradhan Mantri Kaushal Vikas Yojana (PMKVY) under the Skill India Mission aims to skill 400 million individuals by 2025, with around 15 million trained so far.
• National Apprenticeship Promotion Scheme (NAPS) promotes on-the-job practical training aligned with industry requirements.
• Samagra Shiksha Abhiyan integrates vocational training into school curricula to build foundational skills from an early age.
• SANKALP (Skill Acquisition and Knowledge Awareness for Livelihood Promotion) strengthens district-level skilling infrastructure and management.
• Digital India and FutureSkills Prime initiative (NASSCOM-MeitY): A digital skilling platform that has trained over 1.3 million individuals in emerging technology skills like AI, Cybersecurity, and Data Analytics by early 2024.
• PM SHRI Scheme: Launched in 2022, this scheme targets the development of over 14,500 schools nationwide to implement the National Education Policy (NEP 2020), focusing significantly on enhancing educational quality and integrating vocational skills.
• Skill Hubs Initiative: Recently launched by the Ministry of Skill Development and Entrepreneurship (MSDE) in partnership with the Ministry of Education, this scheme aims to establish skill training centers within existing educational institutions, with over 5,000 skill hubs.
   

Despite these substantial initiatives, implementation challenges, particularly low industry participation and insufficient advanced training infrastructure, remain critical issues.
 

Analysis: The Job-Skill Nexus
 

• Employment generation and skill development form an interconnected ecosystem. A workforce equipped with relevant skills is fundamental to attracting high-value employment opportunities, boosting real wage growth, and fostering inclusive economic development.
• India's demographic dividend—with approximately 65% of its population under the age of 35—can translate into sustained economic prosperity only if effective skilling programs align with market demands.
• Countries with robust skill ecosystems, such as Germany, South Korea, and China, consistently demonstrate higher per capita income levels, lower unemployment rates, and superior workforce productivity.
   

Way Forward
 

Key recommendations to address employment and skill development challenges include :
 

• Vocational Education Integration : Integrate practical, industry-oriented skills within educational curricula at all levels (school, college, university).
• Digital and Technological Skills : Promote widespread training in AI, Data Analytics, Robotics, IoT, and cybersecurity to equip the workforce for future-oriented jobs.
• Entrepreneurship and MSME Development:  Facilitate small business growth through improved credit, mentorship, and market access.
• Industry-Academia Partnerships : Foster collaborations between industries and training institutes, ensuring that skilling programs are directly linked to current industry demands.
• Regional Skill Hubs: Create state and district-level training centers customized to local economic strengths and workforce needs.
   

Conclusion
 

India has made substantial progress in employment creation, reflected by improved metrics like WPR and LFPR. Yet, wage stagnation among regular salaried workers remains a major concern due to significant skill gaps. To leverage India’s demographic advantage effectively, the country must urgently bridge these gaps by prioritizing skill training at all educational levels, closely aligning them with industry demands, thus transitioning toward a higher-wage, inclusive economy.

 

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