Degrees without jobs: India's graduate paradox

For decades, India’s low- and middle-income classes have been built around a simple promise: higher education leads to a stable, secure job that safeguards upward mobility. That promise, supported by a shared public-private education landscape, now seems to be unravelling.

The issue is less about the number or availability of institutions and more about the nature and quality of education, coupled with the dynamic changes in the job market.

Each year, millions of graduates enter the Indian labour market, not into better opportunities, but into an increasingly crowded queue where degrees no longer guarantee employment.

This widening structural imbalance is now being sharpened by global technological shifts.

A March 2026 study by AI safety and research company Anthropic shows that high-skill occupations such as business services and computing are projected to grow more slowly, while lower-exposure sectors like construction continue to absorb labour.

Recent data from the State of Working India 2026 report by Azim Premji University reflects this clearly. Between 2004 and 2023, an average of around 5 million graduates entered the labour force each year, but only about 2.8 million found employment.

The result is not just unemployment, but also underemployment, credential inflation and rising household risk.

India’s higher education expansion has been rapid. The number of graduates has risen from 5 million in 1983 to 63 million in 2023, but without a corresponding transformation in labour demand. Among graduates aged 20 to 29, nearly 11 million are unemployed.

Among graduates, only 6.7 per cent secure permanent salaried jobs, and just 3.7 per cent enter white-collar employment. Increasingly, education functions less as a guarantee of mobility and more as a marker of relative position.

What is unfolding is not just a labour market failure, but a crisis of expectations.

India’s labour market remains shaped by a deep-rooted attachment to credentialism, where degrees are seen as the primary pathway to security. Families invest heavily in formal education, often prioritising low-risk career paths over entrepreneurial or vocational alternatives.

The ITI ecosystem has expanded by around 300 per cent since the mid-2000s, with nearly 80 per cent privately operated. This expansion has prioritised scale over quality, weakening training standards and institutional credibility. With weak industry linkages, training often fails to translate into employment, and credentials increasingly serve as markers of participation rather than signals of capability.

As the economy fails to generate corresponding opportunities, credentials lose their signalling value.

Expanding education without a corresponding increase in labour demand does not resolve unemployment; it merely redistributes it across an increasingly credentialled workforce. 

The persistence of graduate unemployment reflects a deeper failure of labour demand. Growth has been driven by within-sector productivity gains, not structural transformation. Labour has not moved into manufacturing and modern services at scale.

Employment elasticity patterns illustrate this clearly. Construction (0.60) and services (0.43) absorb labour, while manufacturing remains weak at 0.22.

Where are the jobs?

Jobs are growing in low-productivity sectors, while areas that could employ educated workers remain underdeveloped.

Analysis of Labour Bureau wage data shows near-stagnant real wages between 2014–15 and 2023–24. Agricultural wages grew by just 0.8 per cent annually for men and 1.1 per cent for women, while non-agricultural wages remained virtually flat. This points to a structural decoupling, where economic growth has failed to translate into meaningful income gains for workers.

The rapid expansion of gig work suggests that labour is increasingly being absorbed into precarious, low-security employment.

With nearly three-quarters of employment remaining informal, job creation often fails to translate into stable income pathways.

Headline indicators mask this stress.

As of February 2026, the Periodic Labour Force Survey (PLFS) reports an overall unemployment rate of 4.9 per cent and urban unemployment at 6.6 per cent. But this stability is compositional: unemployment is increasingly concentrated among the educated.

Structural constraint 

India is not experiencing jobless growth, it is experiencing misdirected growth, where output expands without creating jobs that match the skills of its workforce.

This limitation stems from the structure of India’s enterprise base.

Over 80 per cent of MSMEs operate as micro-enterprises, and nearly 81 per cent function as proprietorships. Across all organisational forms, more than 90 per cent of MSMEs remain at the micro level.

PLFS-linked data show that 74.3 per cent of workers in proprietary and partnership firms are employed in the non-agricultural informal sector.

The informal sector contributed about 45 per cent of GDP in 2022–23, despite employing a much larger share of workers, reflecting a persistent productivity gap that limits the effective use of educated labour.

In such an ecosystem, firms are too small, informal and credit-constrained to generate stable, high-quality employment at scale. Their limited capacity for investment, technological upgrading and formalisation constrains both productivity and wage growth, capping the economy’s ability to absorb an increasingly educated workforce.

Public investment has not corrected this imbalance. Despite capital expenditure exceeding Rs 11 trillion in FY25, investment remains skewed towards capital-intensive sectors, with 57 per cent of projects concentrated in manufacturing, limiting its ability to generate employment suited to India’s increasingly educated workforce.

Education as household risk

Weakening employment outcomes are shifting the burden of adjustment onto households, with the poorest most exposed to risk.

The State of Working India report finds that the cost of pursuing professional degrees like engineering and medicine often exceeds the annual per‑capita household expenditure of poorer households.

Higher education is no longer merely an investment in mobility; it has become a high-stakes financial gamble, increasingly underwritten not by public provisioning but by household risk.

This shift is reflected in credit patterns. A Parliamentary Standing Committee review shows that while the number of education loans has declined from 23 lakh in 2014 to 21 lakh in 2025, total borrowing has surged from Rs 52,327 crore in 2014 to Rs 1.37 lakh crore in 2025 indicating rising indebtedness per student.

From credentials to capability

India’s growth story is increasingly marked by a paradox: rising educational attainment coexisting with a declining ability to convert it into meaningful employment.

As the World Bank notes, India has not created sufficient “more and better jobs” to absorb its growing workforce, with employment growth largely confined to low-productivity sectors. In this context, education serves less as a signal of productivity and more as a marker of relative social and economic standing.

This raises a deeper question: is India shifting from a model of credential-driven security towards one that rewards risk-taking and enterprise-building? While policy discourse increasingly highlights entrepreneurship, structural constraints persist, access to credit remains uneven, firms are often small, and income security is limited.

The danger lies not only in rising youth unemployment but also in the erosion of faith that higher education guarantees a better life, both in qualitative and secure terms. Without a shift towards employment-intensive growth and stronger institutional support for labour absorption, India risks its demographic dividend becoming a structural liability.

(Deepanshu Mohan is Professor and Dean, OP Jindal Global University. Saksham Raj, a research analyst at the Centre for New Economics Studies, OP Jindal Global University, contributed to this article)