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India stands at a pivotal moment in its economic development, with over 808 million individuals under the age of 35. This demographic advantage positions the nation to contribute significantly to the global workforce in the coming years.

However, a pressing challenge looms: Disconnect between Education and Employability.

Critical sectors, such as electronics, which aims for a USD 500 billion valuation by 2030, are experiencing a shortage of skilled workers. This gap is largely due to an education system that prioritizes degrees over practical, skill-based training, resulting in nearly 50% of graduates being unemployed. With 10 million students graduating annually and 12 million individuals entering the workforce each year, the imperative to create jobs and ensure employability has never been more urgent.

Bridging the Education-Employability Gap

The Economic Survey 2023-24 highlights the necessity of generating 7.85 million non-farm jobs annually until 2030. Yet, systemic issues persist. Reports indicate that only 54% of Indian youth are considered employable and a mere 4.1% have received formal training. Many in the working-age population lack vocational or technical training, often relying on self-taught skills. Despite a 61% increase in labour force participation, 40% of youth still face employability challenges.

The education system's focus on theoretical learning leaves graduates unprepared for immediate workforce entry. However, initiatives like the National Apprenticeship Training Scheme (NATS) and the National Education Policy (NEP), which emphasize vocational learning, are steps in the right direction. To effectively bridge the education-employability gap, both government and industry must invest in scalable skilling programs, internships, and apprenticeships that prepare youth to meet labor market demands and secure India’s economic growth trajectory.

Innovative Solutions: Degree Apprenticeships and Internships

Addressing employability and workforce readiness requires innovative solutions such as degree apprenticeships and structured internships. Degree apprenticeships combine academic learning with hands-on training, equipping students with practical skills and ensuring they graduate job-ready, effectively bridging the gap between education and industry needs. Structured internships provide critical workplace exposure, enabling students to develop industry-relevant competencies and adapt to real-world challenges. These models foster stronger industry-academia collaboration, ensuring curricula remain aligned with evolving market demands while reducing recruitment and training costs for employers. Scaling such initiatives, as envisioned in the NEP and supported by programs like NATS, can transform India’s workforce ecosystem. By making skill-building accessible and inclusive, these programs empower youth, including women who often face barriers to workforce entry, through flexible pathways to employment. With active investment from both the government and private sector, degree apprenticeships and internships can bridge the employability gap, foster innovation, and unlock India’s vast potential to drive inclusive and sustained economic growth.

Implementing a Micro-Credit Framework

In addition to the NEP and Apprenticeship Embedded Degree Programme (AEDP), India’s vocational training systems can benefit from the introduction of a micro-credit framework. This system allows students to accumulate credits for various courses, enabling a modular approach to education. Through the DigiLocker system, students receive an Academic Bank of Credits (ABC) ID, which tracks their accumulated credits. This framework offers flexibility, allowing students to tailor their learning paths and acquire diverse skills relevant to the evolving job market. Implementing such a system can further enhance the effectiveness of skilling initiatives, ensuring a more adaptable and proficient workforce.

India's demographic dividend presents a unique opportunity to become a global leader in workforce development. However, realizing this potential requires a concerted effort to align education with industry needs through strategic investments in skilling programs, apprenticeships, and innovative educational frameworks. By embracing these initiatives, India can unlock its economic potential, ensuring sustainable growth and prosperity for future generations.

This is an excerpt from the article authored by our Chief Executive Officer AR Ramesh and published first in Finance Outlook India