There has always been plenty of anecdotal chatter about high unemployment among graduates. The more degree a person has, the less likely he is to land a job, is a meme that appears in common discourse. Education and a lucrative professional career rarely march together.
A recent report by the Azim Premji University on: ‘The State of Working India 2026’ puts numbers to these anecdotes and reveals the problem of the ‘brainy’ class has gotten worse.
India, without doubt, is more educated today. Tracking the last 2 decades since 2004, the report says education opportunities have multiplied with the number of graduates increasing from just 10% among young people (defined as those of age 15 to 29) in 2004 to 28% in 2023. In absolute numbers, graduates tripled to 63 million in 2023 from 19 million in 2004.
However, the success of the education system has not been matched by the job-producing departments. While 50 lakh graduates were added every year, only 28 lakh jobs have been generated annually. The data showed two-thirds of the unemployed youth are graduates, that is about 11 million, up from 32% or 3 million in 2004.
Put in another way: nearly 40% of graduates aged 15-25, and 20% of those aged 25-29, are jobless, far higher than among the less educated, the report finds.
Demographic dividend
Youth and education are a significant demographic dividend India enjoys. The country’s young population is the largest in the world with 367 million in the 15-29 age group. It accounts for one-third of the working population. If this increasingly educated population is absorbed through jobs in the economy, the “demographic dividend translates into a economic dividend.”
But the opportunity cannot be an open window. India's demographic dividend is projected to peak around 2030, with the working-age population share expected to decline thereafter. The coming years is therefore a critical period where the economy must absorb the skill and vision of this 800 million-strong young workforce. If slow job creation shuts them out, India will squander the opportunity.
The passion for higher education among the youth has been matched by institutional progress in the last 2-3 decades. Despite the barriers of caste, gender bias and income disparity, we have been churning out graduates by the millions. The report says since liberalization, the number of higher education institutions has increased from 1,644 to 69,534. Student density has improved from 29 colleges per lakh youth in 2010 to 45 colleges in 2021.
Quality and standards have been a question mark, but here too there is progress. AICTE norms prescribe between 15 to 20 students per teacher. However, private colleges have, on average, 28 students per teacher while public colleges have 47. Since, 2010, the number of Industrial Training Institutes (ITIs) have increased by nearly 300%, led largely by private ITIs.
Financial barriers for those with limited income continue to be a real challenge as the high cost of professional courses shut out most aspirants. But with bank loans and bursaries, the trend is towards increasing democratization. The Azim Premji report for instance mentions between 2007 and 2017, the share of students from the poorest households enrolled in higher education rose from 8% to 17%.
Aspiration delays jobs
Graduate employment is slower and largely out of sync with India’s turnaround on general employment. Over 640 million were employed in 2023-24, reflecting a net increase of 16.83 million jobs over six years. Unemployment has declined to around 3.2%–5.1% of the active workforce. The majority of employment creation has been in agriculture, which generated 40 million of the 83 million jobs added between 2021-22 and 2023-24.
Simultaneously, we see a large exodus of youth from agriculture determined to make a bigger life than farming occupations allow. Young women in particular, not wanting to be relegated to self-employment, a euphemism for unpaid farm work, are leading the charge and entering the fields of IT, automobile manufacture and business support services. The financial attraction is understandable -- graduate jobs pay averagely twice the amount of non-graduate positions.
The problem is employment seeking for young, salaried professions is aspirational. Fresh graduates don’t go for the first job they spot, but hunt out positions they think suit their skill and pay them well. They therefore don’t mind waiting. This exacerbates the ‘unemployed’ period, which could drag on till the graduate becomes ‘realistic’ and finally settles for a job he may have refused earlier.
Early joblessness, reflects an "aspiration-availability mismatch" combined with the ability to wait, says Rosa Abraham, the lead author of the report, in various media interviews. “Over time you mellow, build networks and take what you can", she added.
Another major factor is the vast numbers of unemployable graduates because of a “skill gap”. As many as 46-50% do not reach basic industry standards, some studies say. Higher education produces more ‘generalists’ rather than persons with focused skills. Curricula are again behind the times, and not in step with advances such as AI and automation.
Studies over past decades point in the same direction: a higher rate of unemployment among the more educated youth. But now the problem is spinning out of control as the number of highly educated unemployed is rising exponentially.