India needs a data-driven strategy to plug skill development gaps

PLFS data shows that a sizeable proportion of the workforce aged 15 to 59 still lacks formal vocational or technical training.
PLFS data shows that a sizeable proportion of the workforce aged 15 to 59 still lacks formal vocational or technical training.


  • A ‘census of skills’ in various regions could reveal valuable information and help the government take aptly targeted steps that would eventually raise the Indian economy’s competitiveness.

India’s rapidly growing youth population is a double-edged sword for its economic aspirations. While the demographic dividend presents a tremendous opportunity for growth, capitalizing on it calls for equipping the workforce with skills in line with the changing demands of the global economy. 

World Bank data shows a concerning trend: India’s labour mobilization rates have fallen from over 70% in 1990 to 56% in recent years. This represents an alarming weakness in India’s economy and threatens to undermine its demographic advantage. 

As India strives to position itself as a global economic powerhouse, its ability to transform this demographic bulge into a true dividend through targeted skill development and labour market reforms will be critical.

A skilled and educated workforce is critical for increasing productivity, fostering innovation and attracting investment, all of which in turn contribute to enhancing national competitiveness. An analysis of the Periodic Labour Force Survey (PLFS) data provides more insights. 

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The data shows that workforce growth rates vary across skill levels, offering an insight into the changing composition of India’s skilled workforce and its implications for overall competitiveness. It also showed a disturbing trend: a declining growth rate of highly skilled individuals (skill levels 3 and 4). 

Between 2017 and 2022, the growth rate for these skill levels fell by more than 5 percentage points in at least 22 of India’s 36 states and Union territories. States such as Sikkim, Karnataka, Nagaland, Uttar Pradesh, West Bengal and Goa have had an over 10-point fall in the growth rate of their highly trained workforce.

On the positive side, the semi-skilled workforce (skill level 2) has grown significantly, with a national compounded annual growth rate of 59.5% between 2017-18 and 2022-23. More than 45% of the workforce across states falls into this category, showing a growing demand for individuals with intermediate-level abilities. 

The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) has made a substantial contribution to this positive trend by offering skill training and certification. During the same period, skill level 1, which comprises low-skilled workers, increased by 24.8%. This tendency indicates a continuous reliance on skilled labour across industries, potentially driven by construction, manufacturing or services.

Despite progress, PLFS data also shows that a sizeable proportion of the workforce aged 15 to 59 still lacks formal vocational or technical training. While the proportion has dropped from 91.9% in 2017-18 to 72.6% in 2022–23, it still indicates a major gap in formal skill development for a sizeable segment of the Indian workforce. 

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The PLFS statistics suggest that semi-skilled and low-skilled workers are likely to dominate the workforce, while the growth of high-skilled workers lags. This may have implications for India’s competitiveness.

We are also able to spot skill intensity as a fundamental distinction between rural and urban areas. On average, rural regions have much lower skill intensity than their metropolitan counterparts. However, this disparity is mostly attributable to cluster composition. In India, metropolitan districts host skill-intensive trade clusters. 

Cities such as Mumbai, Bangalore, Delhi and Hyderabad have evolved as centres for IT services, financial services and other knowledge-intensive businesses. These industries often require a higher number of skilled individuals such as software engineers, data analysts and financial professionals. As a result, these urban zones naturally attract a more skilled workforce. 

In contrast, rural districts specialize in agriculture, small-scale manufacturing and traditional crafts, which typically demand a smaller number of highly qualified people. The presence of these businesses in rural areas helps explain the observed lower skill intensity. 

Addressing this disparity necessitates not only skill development, but also the establishment of skill-intensive clusters in rural areas, which may result in more balanced growth across India.

The government has aimed to address this through its Skill India Mission, which resulted in expansion of the skill level 2 workforce. But more coordinated efforts are required by state governments. 

The Chandrababu Naidu-led government in Andhra Pradesh proposed a ‘skill census,’ which can assess current skill levels across regions and sectors. Other states emulating it could promote competitive federalism by leveraging the detailed data thus collected.

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By mapping the current skill landscape, policymakers can pinpoint specific areas with shortages of skills and devise targeted actions. State governments can create specialized skill-building programmes to address the demands of their unique workforces and industries.

This data-driven strategy can result in improvements in skill-development projects. By addressing the talent gap through targeted measures, India can realize the full potential of its demographic dividend.

The road ahead for India’s skill development efforts is difficult, but the rewards are significant. By investing in human capital and utilizing data-driven initiatives, India can turn its demographic advantage into a meaningful economic dividend. 

A skilled and productive workforce will not only drive innovation and increase productivity, it will also significantly contribute to the overall competitiveness of the nation, accelerating India’s journey towards becoming a developed economy by 2047.

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