‘Skilled’ India is failing the employment test

Flawed priorities have led to poor PMKVY outcomes. Skilling must be demand-driven and tied to jobs.

The Comptroller and Auditor General (CAG)’s 2025 Performance Audit has underlined the failures in the Pradhan Mantri Kaushal Vikas Yojana (PMKVY). Its verdict is sobering: years of skill programmes have produced mountains of certificates but few employed youth. From 2015-22, three phases of PMKVY were run with a combined outlay of ~Rs 14,450 crore, yet only about 1.1 crore of the 1.32 crore targeted trainees got certified. Only those certified under short-term training and special projects (56.14 lakh candidates) were tracked for employment outcomes, of whom just 41% (23.18 lakh) secured placements. Indeed, official data show PMKVY claimed a 54% placement rate, but independent analysis pegs the figure at barely 22%. In short, despite high annual budgets, a large share of India’s “skilled” workforce remains unemployed or underemployed, or at best, when employed, they are in the unorganised sector. But that is what the poorly educated and school dropouts have done in any case for decades.

The focus of Skill India schemes has been on churning out certificates, often from very short courses, rather than on real learning. PLFS data shows courses longer than two years shrank from 29% (2017-18) to ~14% by 2023-24, while sub-six-month courses rose from 22% to 44%. Recognition of prior learning certifications among current workers soared from 1.45% of the labour force in 2017 to 11.6% by 2023 – an inflation of numbers that masks true skill-building. The result is stark: formally certified workers face a 17% rate of unemployment, versus just 4% rate among the informally trained (the latter likely working without credentials). In other words, certificates are not translated into employability.

The CAG audit highlights acute misalignment between where India needs skills and where PMKVY trains people. National Skill Development plans (2015-22) projected over 60% of new skill demand in construction, logistics, hospitality, etc., yet PMKVY’s top-trained sectors were electronics, apparel, retail, logistics and beauty/wellness. Apparel alone accounted for 28.4% of all certifications, though it was not among the top-demand sectors. PLFS data shows that apparel, a labour-intensive sector that should have been creating jobs, saw a fall in employment in the first six years of this government. Similarly, at the state level, >50% of projected gaps were in five large states (Maharashtra, Tamil Nadu, Andhra Pradesh, Uttar Pradesh, and West Bengal), but these saw under 35% of fresh training. In contrast, Madhya Pradesh, Rajasthan, and Haryana – with relatively lower projected need – accounted for 22% of PMKVY trainees. In plain terms, training was lopsided: e.g. Maharashtra had ~13.2% of skill gap but only ~5.8% of trainees, while Uttar Pradesh had 8.9% of need but 14.8% of trainees.

PMKVY 4.0 (2022-26) was launched with reforms aimed at data and accountability. Candidate registration through Aadhaar e-KYC, Skill India Digital Hub (SIDH) and student guidance through AI were additions. Rewards have shifted from cash to in-kind (kits and training material), and in a big change, placement is no longer a paid performance metric.

These are welcome steps. Yet CAG notes they are not fully implemented. As of October 2024, key IT validations still lagged, and in PMKVY 4.0, audits already found underage or unqualified trainees slipping through. Earning the cash reward had at least linked employer demand to the training; removing placement-based incentives could risk further complacency. In short, PMKVY 4.0’s e-KYC and SIDH improvements are positive but not sufficient.

Engaging industry on jobs

Beyond these tweaks, the skill mission needs deeper reform. Training must be demand-driven and genuinely industry-led, not just government-mandated. We have long argued, and the CAG data reinforce this conclusion that real employer engagement in curriculum, financing, and credentialing is crucial. Other countries operate sectoral training funds or payroll levies that bind firms into the system. More than 40 countries already use such levies to finance vocational training. Brazil’s industries impose a 1% payroll tax to fund apprenticeships, and South Africa’s “equity training fund” channels corporate levies to upskill marginalised groups. India should explore a similar model: a national skill fund partly raised from firms, not only public coffers. This would incentivise companies to invest in training and provide a much larger and steadier resource base. Public and private sector investment in skills should be complementary – the State building capacity and standards, but firms sharing the cost and owning the content.

The CAG observed that apprentices remain a tiny fraction of the 570-million workforce – only half a million formally – and rightly points out that on-the-job training must grow. We have pointed out that a “collective skill formation” system where firms, colleges, and labour agencies collaborate with clear roles outperforms purely State or purely laissez-faire models. The audit itself implies this: it flags that national and state skill missions failed to mobilise industry demand meaningfully. Strengthening Sector Skill Councils with real employer power (and accountability) so curricula match real jobs could be a priority. For this to succeed, the financial involvement of the private sector is necessary.

Finally, skill initiatives must link tightly to jobs. CAG and past studies note the absence of effective labour-market information systems or job-matching. Training without guaranteed placement is wasteful. The Skill India portal could integrate with high-quality job exchanges. Learning from private job platforms and overcoming India’s digital divide, a unified ‘Rozgar Bazaar’ linking skills to local vacancies could greatly improve outcomes. Crucially, skill policy should explicitly converge with employment policy, matching trades taught to local demand.

We need a genuine shift towards quality, demand-orientation, and shared responsibility. That means involving the private sector fully in design and finance, building true apprenticeships, and bridging skills and jobs through technology and outreach. A robust public-private skill ecosystem with joint training funds, rigorous curriculum standards, and vibrant job linkages is the way forward. India’s demographic dividend depends on it.

(Santosh is a research fellow at the IZA Institute of Labour Economics, Bonn; Harshil is a labour economist. Views expressed are personal)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.