India Unemployment - What the Data Shows and What Must Be Done

Good growth numbers are not enough. India needs jobs. Here is the full picture.

By Kritika Berman

Editorial illustration for India Unemployment - What the Data Shows and What Must Be Done

TLDR - What to Fix

Make every ITI training center sign an employer partner before it gets any government money.
Enforce the new labour codes in every state - pass the rules, hire the inspectors, start now.
Expand the PLI manufacturing scheme into textiles and food processing where millions more jobs are possible.

The Problem You Can See Everywhere

Walk into any small-town government office in India. Outside, there is always a queue of young men with certificates and folders. They are waiting for results. Some are still waiting on interview calls. I grew up seeing that queue in Chamba and Chandigarh. It has not gone away.

India's economy is growing fast. But the jobs are not keeping pace.

Editorial illustration showing a large crowd of young people holding certificates and folders, overwhelmed by a soaring economic growth arrow that bypasses them, representing India's jobless growth paradox

The Scale of the Problem

India's overall unemployment rate hit 9.2 percent in June, according to the Centre for Monitoring Indian Economy (CMIE). That was up from 7 percent the previous month.

But the headline number hides the real crisis. Among young people aged 15 to 29, the unemployment rate was 10.2 percent according to the government's Periodic Labour Force Survey. CMIE found even higher figures: youth unemployment at 45.4 percent among those aged 15 to 24 in one recent year, roughly six times the adult rate.

The gender gap compounds this. Urban women face unemployment rates of over 20 percent. Female participation in the labor force fell from 32 percent to 23 percent between the mid-2000s and the early part of the current decade, according to data cited by the Observer Research Foundation.

According to research published in Work, Employment and Society, India has seen average GDP growth near 7 percent for decades. That growth has generated less than 1 percent employment growth. The economy expands but the job market does not grow with it.

Why It Is This Way

Nearly 85 percent of jobs in India are informal - no written contract, no benefits, no job security, according to the National Sample Survey. That number has not shrunk much in 30 years.

Two reasons dominate.

First, India's old labour laws made it very expensive to hire formal workers. A factory with 100 or more workers needed government permission before it could lay anyone off. Owners kept headcounts just below that threshold, hired fewer people on paper, kept more workers informal, and never scaled up. Policy analysts at PRS Legislative Research called these adverse incentives - the rules rewarded smallness over growth.

Second, India's education system produces too many people with degrees and too few with skills that factories actually need. A welder, an electrician, a machinist - these roles go unfilled while qualified engineers wait in that queue outside the office.

Manufacturing accounts for less than 20 percent of India's nearly four-trillion-dollar economy. In China and Vietnam, that number is above 25 percent. Fewer factory jobs means the informal economy absorbs the overflow.

What Has Already Been Tried

Skill India Mission (launched 2015): Prime Minister Modi launched this mission to train 30 crore people by 2022. Over 1.64 crore candidates have been trained and certified under PMKVY, and 49 lakh apprentices have been engaged through NAPS, according to the Ministry of Skill Development and Entrepreneurship. The number of ITIs has grown from 9,776 to over 14,600. The share of youth aged 15 to 29 who are vocationally trained rose from 7.1 percent to 26.1 percent between 2017-18 and 2023-24. That is real progress. But India's auditor found ghost accounts and dubious certifications inflated some numbers. The mission was set to train 500 million people by 2022 but reached 13.2 million verified trainees. Training at scale requires tighter quality controls, not just targets.

PLI Scheme (Production Linked Incentive, launched 2020): The government introduced performance-based incentives across 14 manufacturing sectors with a total outlay of Rs 1.97 lakh crore. The scheme attracted investments of over Rs 2.16 lakh crore, generated sales of Rs 20.41 lakh crore, and created more than 14.39 lakh direct and indirect jobs. Electronics production rose 146 percent between 2020-21 and 2024-25. Mobile phone imports fell by 77 percent. This is a genuine success. The question is whether it can be scaled across more labor-intensive sectors.

Four Labour Codes (passed 2019-2020, implemented November): India's parliament passed four codes replacing 29 old labour laws covering wages, industrial relations, social security, and workplace safety. Key changes include raising the threshold for needing government permission before layoffs from 100 workers to 300, giving gig and platform workers access to social security, and setting a national minimum wage floor. Implementation is now the test.

Editorial illustration showing a young apprentice working on industrial machinery alongside a mentor on one side, and studying at a vocational school desk on the other, representing Germany's dual apprenticeship training model

How Other Countries Fixed This - Germany's Apprenticeship Model

Germany has one of the lowest youth unemployment rates of any large industrial nation - 5.8 percent, compared to 15.1 percent across the EU, according to CEDEFOP.

The reason is dual vocational training. About 60 percent of German school leavers enter this system. A young person spends roughly 70 percent of their training time inside a company on real jobs, and 30 percent at a vocational school. Companies pay wages during training. The state pays for the school component. After typically three years, the young person already has real work experience and is ready to be hired.

German companies help design the training curricula through their industry chambers. They are partners in building the workforce they need.

India's ITI system was designed with this logic in mind but the connection to industry needs has been weak. The PM SETU scheme proposes to upgrade 1,000 ITIs over five years at Rs 60,000 crore, building a hub-and-spoke model that connects training directly to employers.

Who Is Accountable

The Ministry of Skill Development and Entrepreneurship oversees vocational training including PMKVY, NAPS, and the ITI network. The Ministry of Labour and Employment owns the four Labour Codes and their enforcement. The Ministry of Commerce and Industry runs the PLI scheme. Budget allocation to the Ministry of Skill Development was Rs 3,517 crore in one recent Union Budget. PM SETU commits Rs 60,000 crore over five years.

What Would It Cost

PM SETU commits Rs 60,000 crore over five years to upgrade 1,000 ITIs. The PLI scheme carries a Rs 1.97 lakh crore outlay across 14 sectors. Whether the spending reaches workers who actually get hired is what determines whether any of this matters. The auditor's finding on Skill India shows that money without accountability produces certificates, not jobs.

Editorial illustration showing a handshake between an employer and a training institute administrator above a line of job-ready workers marching forward with tools, representing the reform linking vocational training funding to employer partnerships

What Needs to Happen

Every ITI upgrade under PM SETU should have a signed employer partner before a single rupee is released. If a training center cannot show who will hire its graduates, it should not be funded.

The four Labour Codes are now live. The codes introduced an Inspector-cum-Facilitator system designed to help businesses comply rather than punish them. But enforcement agencies need staffing and training. States also need to finalize their own rules under the codes - several have not yet done so.

The PLI scheme must expand into more labor-intensive sectors. Electronics and pharmaceuticals are high-value but not high-headcount. Textiles, furniture, footwear, and food processing can each absorb millions of workers.

Female labor force participation needs its own intervention. The labour codes now allow women to work night shifts legally across all establishments. Getting women into those shifts requires safe transport, onsite facilities, and enforcement against harassment. District administrations can deliver them.

Frequently Asked Questions

What is India's current unemployment rate?

According to the Centre for Monitoring Indian Economy (CMIE), India's overall unemployment rate hit 9.2 percent in mid-, up from around 7 percent the month before. The government's own Periodic Labour Force Survey puts youth unemployment (ages 15-29) at 10.2 percent. These two sources measure differently, which is why the numbers vary.

Why is youth unemployment so much higher than the overall rate?

Young people in India face a skills mismatch. Colleges produce graduates but manufacturers need welders, machinists, and electricians. The formal economy is not large enough to absorb everyone with a degree. CMIE data found youth unemployment (ages 15-24) running roughly six times the overall adult unemployment rate in recent years.

What has the Modi government done to create jobs?

Three major actions stand out. First, the PLI scheme (launched 2020) has created over 14.39 lakh direct and indirect jobs across 14 manufacturing sectors and attracted Rs 2.16 lakh crore in investment, per Ministry of Commerce data. Second, Skill India has trained over 1.64 crore candidates and grown the ITI network from 9,776 to over 14,600 centers. Third, four new Labour Codes implemented in November replaced 29 old laws and extended social security to gig and informal workers for the first time.

Why does India have so many informal jobs?

India's old labour laws made formal hiring expensive and risky. Factories with more than 100 workers needed government permission to lay anyone off. Most businesses stayed small deliberately to avoid the rule. This kept most of the workforce informal - meaning no contracts, no benefits, and no job security. The new Labour Codes raise that threshold to 300 workers, which should encourage more formal hiring.

How does Germany keep youth unemployment so low?

Germany uses a dual vocational training system where young people spend about 70 percent of their training time working inside real companies. The companies pay the training wages. Industry chambers help design what is taught. By the time training ends, the young person already has real experience. CEDEFOP data shows Germany's youth unemployment rate at 5.8 percent compared to over 15 percent across the EU average.

What is the PLI scheme and is it working?

PLI stands for Production Linked Incentive. The government offers financial rewards to companies that manufacture in India and increase their output. It covers 14 sectors with a total outlay of Rs 1.97 lakh crore. As of December , it has created over 14.39 lakh jobs and electronics production has risen 146 percent. Mobile phone imports fell 77 percent as India now makes most of its own phones. It is working - the next step is expanding it to more labor-intensive industries like textiles and food processing.

What happened to the Skill India Mission's targets?

Skill India was launched with an ambition to train 500 million people by 2022. India's government auditor found the actual verified number was 13.2 million, with concerns about ghost accounts and dubious certifications. The core infrastructure - ITIs, PMKVY centers, apprenticeship schemes - is real and growing. But the audit findings mean India needs stronger quality controls and placement tracking, not just training numbers.