From skill India to an employment hub

With the Union Budget 2026-27 approaching on February 1, policy decisions will be critical in determining whether India’s demographic advantage translates into tangible economic gains. Amid various priorities, the government’s renewed focus on skills, employment, innovation, and start-ups is both timely and essential for achieving the vision of Viksit Bharat. However, policy intent must be matched by effective implementation. The central challenge is whether Budget 2026 can elevate Skill India from a training initiative into a robust engine for employment generation.

The emphasis on employment-linked skill development represents a significant strategic shift, particularly given that nearly 67 per cent of India’s population is of working age. This transition, however, requires greater precision and a stronger focus on measurable outcomes. Welfare initiatives such as the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which provides free food grains to over 810 million beneficiaries at a cost of ?11.8 lakh crore, have been vital in supporting vulnerable populations. Nevertheless, food security alone cannot replace the need for income security. Sustainable poverty reduction necessitates large-scale, productive employment facilitated by relevant, market-driven skills.

Prioritising skills development acknowledges India’s growing skill deficit, especially in sectors such as health and wellness, manufacturing, logistics, electronics, green energy, and emerging digital fields. Collaboration between industry and academia, international partnerships, and technology-driven skilling models have the potential to position India within high-value services and advanced manufacturing. However, the full potential of these initiatives has yet to be realised.

Labour market realities underscore the urgency of reform. According to the International Labour Organisation (ILO), the share of educated unemployed in India has risen alarmingly-from 35.2 per cent in 2022 to nearly two-thirds by 2030. Even more concerning is the persistently high proportion of youth who are not in education, employment, or training (NEET). ILO estimates place this figure at over 40 per cent for the 15-24 age group, significantly higher than both South Asian and global averages. This reflects not just a lack of education, but a profound mismatch between education, skills, and employment.

The trajectory of the Skill India Mission, launched in 2015, provides valuable insights. The rebranding and revitalisation of the former National Skill Development Mission heightened expectations regarding scale and impact, including the ambitious goal of skilling 300 million individuals by 2024. Nearly a decade later, results remain inconsistent. Well-intentioned measures such as strict compliance requirements, rigid attendance policies, and centralised monitoring have unintentionally reduced participation and retention, particularly among economically disadvantaged youth who cannot afford to forgot daily income.

Though the India Skills Report (ISR) 2026 highlights a marginal improvement over previous years-from 54.81 per cent in 2025 to a projected 56.35 per cent in 2026-reflecting a shift towards a skill-based economy, employers continue to flag deficits in problem-solving ability, communication skills, digital literacy, and job readiness.

Degrees alone no longer guarantee employment, and skilling programmes that operate in isolation from industry demand risk becoming certification exercises rather than pathways to livelihoods.

Budget 2026 must therefore recalibrate its approach to skill development. There is an urgent need to expand skilling programmes and strengthen industry partnerships to establish continuous learning pathways and improve employability, particularly for school dropouts and unskilled or semi-skilled workers who require income while participating in training.

The Union Budget 2022-23 included the announcement of 75 skilling e-labs to advance vocational education through simulated learning environments. While such virtual labs represent valuable innovations, the scale of India’s skilling challenge is far broader. Technology-driven solutions, including API-based skill credentials and job discovery platforms, have limitations. Ultimately, large-scale, practical skill development rooted in local industry needs and supported by adaptable, worker-centric training models remains irreplaceable.

Apprenticeships represent a highly effective link between skill acquisition and employment. The proposed Right to Apprenticeship framework, designed to provide legal support for structured on-the-job training, is a positive development. However, its implementation has been slow and inconsistent. Given that India adds over 12 million young people to the workforce annually, expanding high-quality apprenticeships, particularly within MSMEs, manufacturing clusters, and the services sector, should be prioritised at the national level. Budget 2026 must also address the rapid evolution of India’s labour market. The gig and platform economy has grown nearly eightfold between 2020 and 2024, attracting millions of young workers from Tier II and Tier III cities and rural regions. Despite this expansion, most gig workers remain confined to low-skill, low-wage positions with limited prospects for advancement. Targeted budgetary allocations for upskilling gig workers, portable certifications, and skilling linked to social security can transform this sector into a pathway for upward mobility.

Although initiatives such as virtual skilling labs, e-labs, and digital credentialing platforms are beneficial, they cannot replace the need for extensive physical training infrastructure. This is particularly important for school dropouts and semi-skilled workers, who constitute the core of India’s informal economy. Technology should serve as an enabler, rather than a substitute, for strong local skilling ecosystems.

India’s ambition to become a $7 trillion economy by 2030 and the world’s third-largest economy will depend on the effectiveness of Budget 2026 in narrowing the skills-employment gap. Achieving this objective will require significantly increased funding, enhanced employer engagement, adaptable delivery models, and a sustained emphasis on measurable outcomes rather than mere enrolment numbers.

Policymakers face a critical decision: continue training millions without guaranteed employment pathways, or strategically align skill development with employment, productivity, and economic growth. Budget 2026 presents a unique opportunity to realign priorities and ensure that Skill India becomes a driving force for job creation, income generation, and inclusive development in the years to come.

The writer is Co-Founder and Managing Director of Orane International, a Training Partner with the National Skill Development Corporation (NSDC); views are personal