New Delhi, July 3, 2025 – A recent report by the Institute for Competitiveness has shed light on a worrying trend in India’s education-to-employment pipeline. Despite the country producing millions of graduates every year, only 8.25% of them are working in jobs that truly match their educational qualifications. The report, based on the Periodic Labour Force Survey (PLFS) and structured using the National Classification of Occupations (NCO), paints a grim picture of India’s growing skills mismatch.
Overqualified, Underemployed: The Harsh Reality for Indian Graduates
According to the report, over half of Indian graduates are currently employed in Skill Level 2 occupations – including clerical roles, machine operations, and sales jobs – which require relatively lower qualifications. Even among those educated for Skill Level 4 roles, nearly 28.12% are stuck in lower-tier jobs, highlighting a troubling trend of overqualification and underemployment.
In Skill Level 3 occupations, the alignment between education and job roles remains poor. Only 8.25% of people with appropriate qualifications are employed in roles that actually match their skill level. This disconnect shows a structural failure in India’s labour market, where degrees don’t necessarily translate into career success.
Underqualification Also Looms Large
While overqualification remains widespread, the report also flags underqualification as a persistent issue. Around 8.56% of those in Skill Level 2 jobs do not meet the minimum educational criteria. Many of these workers have possibly acquired skills through informal training or on-the-job learning, pointing to the importance of vocational and technical education (TVET). Unfortunately, India’s current TVET ecosystem lacks the infrastructure, accessibility, and industry alignment needed to bridge this gap.
The Regional Divide: States Struggle Unevenly
The skills mismatch isn’t uniform across the country. States with large youth populations such as Uttar Pradesh, Bihar, Madhya Pradesh, and West Bengal are facing acute problems of underemployment and skill mismatch. The consequences? Rising migration, strain on urban infrastructure, and shrinking local economies as redundant skills fail to generate meaningful employment.
For example, in 2023-24, states like Bihar and Meghalaya still had more than 60% of their workforce with only Skill Level 1 education—the lowest in the NCO framework. In contrast, Goa and Kerala performed far better, showing that regional policy interventions do make a difference.
Access to Higher Education Remains Unequal
India has achieved near-universal primary education, but the pathway to higher education is still marred by regional inequality. While Kerala and West Bengal have made commendable strides in increasing female enrolment, regions like Lakshadweep have seen an alarming 90% decline in higher education participation over the past decade.
Worse still, only 2.17% of India’s population has qualifications suited for Skill Level 4 jobs—the top tier of professional and technical roles. The disparity is glaring: Chandigarh leads with 11.21%, but Bihar (0.45%) and Jharkhand (0.70%) are far behind.
Economic Opportunity through Upskilling
The report emphasizes that investing in upskilling can unlock massive economic benefits. Moving workers from intermediate to advanced skill levels could increase wages by up to 149%, improving household income and giving a boost to national GDP.
But the path forward requires funding. India currently allocates just 3.06% of its national budget to higher education, far below what is needed to bring about systemic change. The report estimates a funding shortfall of ₹88,000 crore that must be addressed if India is to meet the demands of a modern, knowledge-driven economy.
The Road Ahead: Reforms Must Follow
India stands at a crossroads. With one of the world’s youngest workforces, the country has immense potential to drive global innovation and economic growth. But to unlock this potential, there must be a realignment of education with employment outcomes. This includes:
- Expanding vocational and technical education
- Investing heavily in teacher training and digital learning infrastructure
- Aligning curricula with industry needs
- Targeted state-level interventions for lagging regions
The current mismatch between skills and employment is more than an economic issue—it is a social and developmental challenge. Without urgent and strategic reform, India risks wasting its demographic dividend and deepening the divide between education and opportunity.
