Widespread Youth Protests Highlight Systemic Issues
In recent weeks, India has witnessed considerable unrest among its youth, culminating in the resignation of Education Minister Dharmendra Pradhan. This departure followed extensive protests by Generation Z individuals, who took to the streets to express their frustration over recurring entrance exam paper leaks. While Prime Minister Narendra Modi's administration has managed to mitigate the immediate crisis, the broader issue of youth discontent is expected to remain a persistent challenge for the government.
In response to the protests, Prime Minister Modi swiftly announced the establishment of fast-track courts to prosecute those implicated in the leaks and appointed tech entrepreneur Nandan Nilekani to lead efforts in reforming the examination system. However, experts suggest that a more comprehensive approach is necessary to alleviate the anxieties of young people who feel increasingly disillusioned by a system that they believe offers insufficient opportunities for livelihood and productive employment through education.
Economic Weaknesses and Educational Shortcomings
Santosh Mehrotra, a seasoned economist and author of 'India Out of Work: Rethinking India's Growth Story,' highlights fundamental issues within the Indian economy. According to Mehrotra, the labor market has become increasingly competitive over the past decade, characterized by stagnant real wages and a lack of growth in non-farm employment. He points to a dual problem: a structurally weak economy that hinders labor demand, coupled with an education system that struggles to produce employable graduates.
Historically, the government has defended its economic policies, particularly against criticism regarding uneven growth, by pointing to rapid GDP expansion fueled by substantial state investment in infrastructure. However, the recent upheaval may compel the administration to directly address the intertwined crises of education and youth unemployment. Mehrotra suggests that the significant expansion of India's welfare state, including direct cash transfers, indicates a private acknowledgment by the government of these underlying problems, though the scale of the necessary reforms is immense.
The Challenge of Youth Employment and Employability
India boasts the world's largest youth population, with over 360 million individuals aged between 15 and 29. Despite significant advancements in educational enrollment and a proliferation of private colleges and vocational training institutes over the last two decades, the transition from education to employment remains a formidable obstacle, especially for graduates. A report from Azim Premji University, 'State of Working India 2026,' indicates that unemployment rates among young people are nearly four times higher than among non-youth and considerably surpass global averages.
This issue is not new; graduate unemployment has fluctuated between 35-40% for the past 25 years. However, it has been exacerbated in recent years by India's demographic dividend – a burgeoning workforce – and improved educational outcomes. In 1983, 4% of 20 to 29-year-olds were graduates, with 13% of them unemployed. By 2023, this figure rose to 28% graduates, among whom a striking 67% were not employed. The quality of education continues to be a major factor affecting employability, as the increase in graduates has not been matched by a proportional rise in graduate employment opportunities. The report notes that between 2004-05 and 2023, approximately five million graduates were added annually, yet only about 2.8 million secured employment, with an even smaller fraction entering salaried positions, contributing to escalating graduate unemployment and decelerating earnings growth.
Furthermore, there is little evidence to suggest that ambition is being adequately rewarded. The report reveals that a mere 3.7% of graduates or post-graduates found white-collar employment, and fewer than 7% obtained permanent salaried jobs.
Addressing Structural Economic Issues and Future Outlook
The current employment crisis is not amenable to quick fixes. Mehrotra suggests that some job creation could come from a rapid revitalization of small and medium-sized enterprises (SMEs), which have been significantly impacted by past policies such as demonetization and the uneven implementation of the Goods and Services Tax. However, he emphasizes the need for a new industrial policy focused on reinvigorating the manufacturing sector. Manufacturing's contribution to India's GDP has declined from 17% in 2015 to 14% currently, and manufacturing employment, after a five-year decline post-2015, has only recently shown a slight recovery.
Concurrently, Mehrotra observes a concerning trend: total employment in agriculture has increased by 80 million people since 2020, indicating widespread disguised unemployment. In a typically industrializing economy, workers transition from agriculture to services or manufacturing. Adding to these challenges, the business model of key job-creating industries like software, long a cornerstone of the Indian middle-class dream, is being disrupted by artificial intelligence (AI).
Goldman Sachs estimates that 8-12% of non-farm jobs in India are at risk of AI substitution. The effects are already visible, with single-digit growth in IT hiring, an increase in unstable contract work, and stagnant wages. Neeti Sharma, CEO of Team Lease Digital, a prominent staffing agency, notes that the knowledge-based jobs that Indian STEM graduates once took for granted are no longer abundant. A recent incident at HCL Technologies, where employees protested for higher wages, underscores the growing frustration within an industry once seen as a gateway to a better life.
Sharma advises that young graduates must adapt to the new reality of declining white-collar knowledge jobs, and educational institutions need to pivot towards providing vocational skills rather than solely knowledge-based learning, as hiring increasingly prioritizes skills over degrees. This implies that even graduates may need to consider roles such as plumbers, electricians, and mechanics, rather than expecting traditional office-based careers. As market investor Devina Mehra observed on X, this generation may not be able to take for granted a lifestyle superior to that of their parents. Such a plateauing of earnings at this stage of India's development could be catastrophic, a challenge the Modi government must diligently work to prevent.