India’s Skill Gap: A Challenge and an Opportunity for Growth and Development

How India can overcome the mismatch between the skills that employers need and the skills that workers have, and create a skilled workforce

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India is a country with a large and young population, a vibrant economy, and a growing demand for skilled workers. However, it also faces a serious challenge of skill gap, which is the mismatch between the skills that employers need and the skills that workers have. According to a report by the World Economic Forum1, India ranks 66th out of 132 countries in terms of human capital development, which measures the ability of a country to maximize and leverage its human potential. The report also estimates that by 2022, more than half of India’s workforce will require reskilling to meet the demands of the Fourth Industrial Revolution.

The skill gap in India has several causes and consequences. Some of the main causes are:

  • The low quality and relevance of education and training systems, do not prepare students for the changing needs of the labor market. According to the National Employability Report for Engineers 2019 by Aspiring Minds[2], only 2.5% of engineers in India possess artificial intelligence skills while only 5.5% are qualified with basic programming abilities. The report also says that Indian engineers are far behind their global counterparts when it comes to honing relevant digital skills in the global job market, such as artificial intelligence, machine learning, data science, and wireless technologies.

  • The lack of exposure and experience among students, who do not get enough opportunities to apply their skills in real-world situations. According to the India Skills Report 2023 by Wheebox[3], only 40% of the total graduate engineers opt for internships for hands-on experience with 36% taking up projects other than their coursework.

  • The insufficient investment and innovation in skill development by the government, private sector, and civil society. According to ManGroup’s report of Talent Shortage 2020[4], 63% of companies in India report a shortage of talented employees, mainly in IT, engineering services and Sales. The report also says that owing to the skill shortage, 53 percent of Indian businesses could not recruit in 2019.

  • The rapid pace of technological change and disruption creates new skill requirements and makes existing skills obsolete. According to the Global Skills Gap Report 2019-2020 by Udemy[5], 92% of employees in India believe that there is a skills gap in the country and around two-thirds (76%) of them feel they have been personally impacted by such a skills gap.

Some of the main consequences are:

  • The loss of productivity and competitiveness for businesses, which struggle to find and retain skilled workers. According to the International Labour Organisation (ILO), India is staring at a 29 million skill deficit by 2030, which could hamper its economic growth and social development.

  • The increase in unemployment and underemployment for workers, who face difficulties in finding jobs that match their skills and aspirations. According to the Periodic Labour Force Survey (PLFS) 2018-19 by National Statistical Office (NSO), the unemployment rate in India was 5.8%, which was the highest in 45 years. The report also says that the unemployment rate was higher among urban youth (20.6%) than rural youth (17.3%) and higher among educated youth (18.7%) than uneducated youth (5.7%).

  • The widening of social and economic inequalities for individuals and communities, who are left behind by the skill gap. According to the World Inequality Database, India’s income inequality has increased significantly since the 1980s, with the top 10% income share rising from 30.6% in 1980 to 56.1% in 2019.

The skill gap in India is not only a challenge but also an opportunity. If addressed effectively, it can unleash the potential of millions of Indians and transform the country into a global leader in innovation and growth. To bridge the skill gap, India needs a holistic and collaborative approach that involves all stakeholders: government, industry, academia, civil society, and individuals. Some of the key actions that can be taken are:

  • Reforming the education and training systems to make them more relevant, flexible, and inclusive. This includes improving the quality and accessibility of school education, vocational education, higher education, and lifelong learning.

  • Creating a culture of learning and skilling among workers, especially those who are most vulnerable to skill obsolescence. This includes raising awareness and motivation for skill development, providing guidance and counseling services, and facilitating recognition and certification of skills.

  • Investing and innovating in skill development initiatives that are aligned with the current and future needs of the labor market. This includes supporting public-private partnerships, leveraging digital technologies, promoting entrepreneurship and innovation skills, and fostering cross-sectoral collaboration.

  • Strengthening the skill development ecosystem to enable effective coordination, monitoring, evaluation, and feedback. This includes establishing a robust skill data system, enhancing quality assurance mechanisms, developing common standards and frameworks, and engaging with international best practices.

Bridging the skill gap in India is not an easy task, but it is a necessary one. It requires a shared vision, a sustained commitment, and a collective effort from all stakeholders. By doing so, India can create a skilled workforce that is ready for the opportunities and challenges of the 21st century.