India’s economy has not been creating enough formal jobs to absorb the country’s large and growing youth population. Forces such as technology, restructuring of trade into global value chains, climate change, and now the pandemic, are altering the labour market in unprecedented ways and are exacerbating the employment challenge. Even before the pandemic, the youth unemployment rate of 17.3 percent was nearly three times the adult rate. Youth are disproportionately represented in contractual and informal work often characterized by low productivity and low wages.
Central and State governments have sought to address some of these challenges through the provision of skills training, and increasingly through employment services, career counseling, and entrepreneurship support. But these interventions tend to be supply-driven rather than demand-led. Mismatches between labour supply and market demand are obstructing improvements in employment outcomes for youth.
Different dimensions of the labour market mismatch are as follows:
Why does the labour market mismatch exist in India? Firstly, industry engagement with the skills training ecosystem has been insufficient. As a result, training has become increasingly divorced from what the market needs. Secondly, skills training institutions like Industrial Training Institutes (ITIs) are slow to adapt to changing labour market demand, failing to implement needed revisions in their content and methods of training to keep up with advancing technology, evolving business needs, and changing sectoral labour demand patterns. Lastly, existing attempts to map labour market demand have been at the macro-level, ignoring the important role local geographies and place-based dynamics play in employment.
The JustJobs Network, in collaboration with Quest Alliance, conducted a study examining India’s ITI ecosystem to better understand existing mismatches and how to address them. The research hones in on Gujarat as a case study examining three districts: Ahmedabad, Rajkot and Narmada, to understand how misalignments between industry expectations, the provision of training through ITIs, and youth expectations, intersect with youth underemployment and unemployment in the State.
Given that several factors drive the mismatch between the supply of labour and the demand for it, rectifying any one factor will help, but will not singularly fix all that is deficient in the skills ecosystem. This will take fundamental, large-scale reform. But, rectifying the current labour market mismatches by conducting better, more localized (by small geographies or sectors), assessments of labour market demand; strengthening ITI placement and employment services especially accounting for the specific needs of girls and women; and systematizing engagement with firms, are steps in the right direction.
India’s labour market was already confronting significant and growing challenges before the pandemic struck. But the current moment presents a policy window to make fundamental shifts to create a better, more inclusive, and equitable world for work. The next two decades provide a unique demographic window to harness the productive potential of the country’s youth.
This research was published with support from the Future Right Skills Network (FRSN).
FRSN is a collaboration facilitated by Quest Alliance and funded by Accenture, Cisco and J.P. Morgan. The network is supported by civil society organizations and state governments in partnership with the Directorate General of Training (DGT) under the Ministry of Skill Development and Entrepreneurship. FRSN is on a mission to empower young people in technical and vocational training institutes with employability skills for the knowledge economy.