With over 1.4 billion people and a median age of 28 years, India is teeming with young, educated minds brimming with potential. However, this demographic dividend is at risk of turning into a liability as unemployment rates rise. The Centre for Monitoring Indian Economy reported around 7.8% unemployment in December 2024, with higher rates in urban areas. Every year, over a crore of graduates and postgraduates enter the job market, often facing a “No Vacancy” sign.
As the Union Budget approaches, the youth are expecting a focus on this pressing issue, viewing it not merely as an economic challenge but as a societal imperative. How might the FM prioritise this budget to address job creation for Gen-Next?
Bridge the gap between degrees and employability
One of the biggest challenges is the mismatch between the skills of educated youth and industry requirements. While we boast the largest numbers of engineers, MBAs, and other professionals annually, many employers lament a lack of "job-ready" candidates. The government should consider ramping up investments in skill development under schemes like Skill India, but ensuring job guarantees as a prerequisite for engaging private skill providers. We could emulate Germany’s dual vocational education and training system, where companies and vocational schools work together to create an industry-aligned curriculum, or look at the Swiss apprenticeship programmes, expanding coverage across India and including them as part of CSR qualifiers.
We already have programmes like PMKVY, but there is scope for expansion. Offering incentives to private-sector players to establish training academies and developing PPPs could be effective drivers. Integrating new technologies (AI, robotics, and blockchain) into these curriculums can help make the youth future-ready.
Nurture job creators
The Startup India Mission was created with the aim of addressing unemployment by nurturing job seekers into job creators. Startups are a potent driver of employment. India’s startup ecosystem is the third-largest in the world, yet only a fraction of the population is supported in pursuing entrepreneurial ventures. The budget should introduce measures to incentivise entrepreneurship, particularly in Tier 2 and 3 cities.
Most of the startups in India have not passed the five-year sustainability test. This must change for India to be considered an innovation nation. Expanding on Startup India by adding scalability hubs, reducing compliance burdens, and offering further tax holidays or subsidised loans to young entrepreneurs could transform the employment market. Building more incubation centres and ensuring access to venture capital in smaller cities would help.
Incentivise labour-intensive sectors
While the IT sector dominates employment discussions, India cannot ignore the potential of labour-intensive sectors like textiles, construction, and agriculture. While agriculture contributes 19% to GDP, it employs over 42% of the labour force. The budget may look at bringing a tech focus and productivity boosters to such sectors, driving both GDP contribution and value creation in the labour market. Bangladesh’s garment sector employs over 4 million people, driving both its economy and export growth. Such sectors have the capacity to absorb large numbers of semi-skilled and unskilled workers.
The government could consider expanding the PLI schemes to these labour-intensive industries. Infrastructure projects under the National Infrastructure Pipeline (NIP) could also generate significant employment. Increased budgetary allocation for rural employment schemes like MGNREGA, along with the introduction of urban job guarantee schemes, could provide immediate relief to underemployed populations.
Drive tech and digital job markets
A NASSCOM report predicts India’s technology industry will reach $350 billion by the end of this year, but there remains a significant skills gap in preparing the youth for emerging digital jobs. Governments worldwide are investing heavily in technology training. The EU’s "Digital Skills and Jobs Coalition" aims to upskill citizens to meet the demand for digital jobs.
India may need to replicate such models by integrating coding, AI, data analytics, and cybersecurity into mainstream education and skill development initiatives. Special “conditional” tax incentives for companies hiring youth in these domains would also encourage job creation.
Revamp Education System Beyond the NEP
The root cause of unemployment may be traced back to the disconnect between the education system and market demands. While the NEP 2020 is a step in the right direction, its implementation requires budgetary support and broader inclusion of institutes. The budget can allocate funds to revamp curriculums, integrate vocational education, and make internships a mandatory part of all higher education programmes. Expanding the NAPS initiative could also provide more students with practical exposure.
Leverage Green Jobs
The recently concluded COP-29 summit highlighted sustainable programmes, presenting a unique opportunity for India. As the country aims for net-zero emissions by 2070, green jobs in renewable energy, waste management, and sustainable farming could become major employment generators. India could increase budget allocations for the National Solar Mission and the Green Skill Development Programme to create a new wave of environmentally conscious employment. Ensuring that SMEs and big conglomerates are a part of this is essential.
While job creation is critical, providing a safety net for the unemployed is equally important. Social security programmes, such as unemployment benefits and skill-upgradation allowances, could further help those struggling to find jobs—despite some experts arguing against freebies.
To combat unemployment, India must embrace real-time labour market data to help policymakers understand job trends and skill gaps. The budget could allocate funds to establish a system for data-backed decision-making. A National Employment Dashboard, integrating data from various sectors and regions, could serve as a valuable tool for all stakeholders.
As the Union Budget 2025 approaches, it’s important to remember that the youth is a strength, and the budget must reflect the ambition to unlock its full potential. In a modern twist on Roosevelt’s "The only thing we have to fear is fear itself," don’t fear the numbers—let them fuel the future!
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
