India's Real Youth Problem May Be Underemployment, Not Unemployment

On International Youth Day, the focus should shift from whether young Indians have jobs to whether those jobs align with their education, skills and career aspirations

As India marks International Youth Day 2026 under the theme, 'Different Contexts, Common Aspirations', the conversation around young people and employment deserves a broader lens. The country's youth may come from different social, economic and educational backgrounds, but they share a common aspiration: meaningful work that offers financial security, dignity and career growth.

Yet, public debate continues to revolve around one indicator—unemployment. While important, it does not fully capture the reality facing millions of young Indians entering the labour market. A graduate working in a role that does not require their qualification, a diploma holder moving between temporary assignments, or a skilled worker accepting lower-paying jobs because suitable opportunities are scarce may all be classified as employed. The bigger question is whether India is creating careers, not just jobs.

More Education, Limited Career Pathways

India has invested heavily in expanding access to higher education and skilling over the past decade. The challenge today is less about classroom access and more about ensuring education translates into productive employment.

The NITI Aayog Working Paper, 'Education and Skilling for Employment: From Credentials to Learning Outcomes', highlights this disconnect. It notes that 57.7 per cent of India's workforce is self-employed, 19 per cent works as casual labour and only 23.2 per cent is employed as regular wage or salaried workers. It further estimates that highly skilled formal jobs account for only about 10 per cent of the labour force.

Beena Jacob, Chief Human Resources Officer, Blue Dart Express, believes the focus is increasingly shifting towards what happens after a person is hired. "India's challenge is increasingly moving from creating jobs to creating careers that build capability, mobility and earning potential over time. Employment must become a pathway, not an endpoint," Jacob said.

The paper also notes India has around 52 million students enrolled in tertiary education, with the issue being whether qualifications lead to jobs that utilise their skills.

Vimal Dangri, CHRO and General Counsel, Mastek, also sees the first job as only the starting point. "The concern is not only whether a young person gets a job, but whether that job provides a pathway to build skills and a career," Dangri said.

A Better Prepared Workforce

At first glance, the employment outlook appears encouraging. The 'India Skills Report 2026' shows that overall employability has risen to 56.35 per cent in 2026 from 54.81 per cent a year earlier. Compared with 46.21 per cent in 2020, employability has improved by roughly 10 percentage points over six years.

The report, based on more than 700,000 candidates across 28 states and nine Union Territories, also suggests that employers are optimistic about future hiring, with companies expecting 40 per cent of planned recruitment in FY27 to come from newly created roles.

However, employability differs sharply across qualifications. MBA and engineering graduates record employability above 70 per cent, while ITI graduates stand at 45.95 per cent and polytechnic graduates at 32.92 per cent.

Arun Pratap Singh, Chief People Officer, Decimal Point Analytics, said improving employability is only the first step. "The next chapter is depth: how well organisations map career trajectories, create visibility and build skill progression that feels tangible to young professionals," Singh said.

Students themselves recognise the importance of workplace exposure. According to the report, 92.8 per cent want internships. Govindraj MK, CHRO, Myntra, said internships can play an important role in closing the transition gap. "Responsibility for preparing young talent is shared and internships can play an important role in bridging the gap between academics and the workplace," Govindraj said.

The Missing Link

The gap between education and employment becomes even clearer in the 'NIIT India Skills Gap Report 2026'. Based on responses from 3,500 students, employees, employers, recruiters, CXOs and academic leaders, the report finds that students rate their job readiness at just 57 out of 100, compared with 82 among senior professionals.

Only 35 per cent of students say they are very optimistic about their future careers, while 24 per cent remain unsure. At the same time, 73 per cent of academic leaders report that fewer than half of their students participate in internships or apprenticeships before graduation.

Jacob said graduates cannot be expected to enter workplaces fully prepared. "Education must build strong foundations, while employers provide practical exposure, mentorship and learning. The transition from classroom to workplace should be a bridge, not another barrier for young talent," she said.

The report also highlights changing employer expectations. While 31 per cent of candidates continue to value traditional degrees, employers increasingly prioritise practical evidence of skills. Around 38 per cent place greater importance on micro-credentials, while portfolios, certifications and apprenticeship experience are gaining prominence.

Shiza Ansari, CHRO, Shemaroo Entertainment, said changing workplaces have increased pressure on young graduates. "Education courses are largely designed to provide foundational knowledge whereas employers expect the ability to apply the knowledge," Ansari said.

Perhaps most significantly, 62 per cent of organisations say their learning and development programmes reach less than half of their workforce.

From Jobs To Careers

Sandip Weling, Whole-time Director and Chief Business Officer – Global Retail, Aptech, said young people may come from different contexts but share aspirations "to learn, create, innovate and build meaningful careers".

International Youth Day's theme reminds us that although young people come from different contexts, they share common aspirations extending beyond employment to meaningful careers, continuous learning and financial independence.

For CEOs and CHROs, this means rethinking success. Recruitment numbers alone cannot define progress if young employees struggle to find roles matching their education or fail to see a pathway for advancement.

India has made progress in improving employability and expanding educational access. The next challenge is ensuring these gains translate into quality employment. As the country looks to harness its demographic dividend, the conversation must move beyond creating jobs to creating careers.