Ajit Ranade: India must free its youth from a degree trap to brighten their employment prospects

In 2011, a young male graduate earned about ₹21,800 a month; a non-graduate ₹9,000. By 2023, the graduate earned ₹19,573 while the non-graduate ₹10,507. Graduate earnings have fallen in nominal terms over 12 years.

Adjusted for inflation, they have collapsed. This data, buried in Azim Premji University’s fifth State of Working India report (2026), tells a stark story. The headline story from the report is that 67% of India’s unemployed youth aged 20-29 are graduates; i.e., about 11 million people.

In 2004, graduates made up just 32% of unemployed youth. The share of graduates in the youth population has itself risen from 10% in 2004 to 28% in 2023. But unemployment among them has risen much faster.

The ILO-IHD India Employment Report 2024 had already flagged a graduate unemployment rate of 29%, compared to just 3% for those who cannot read or write. This trend of rising graduate youth unemployment has been known for a decade now. The reasons lie on both the demand and supply sides of the labour market.

On the latter, we have rational waiting combined with an irrational lottery. Educated youth can now afford to hold out for a job worth taking. With household incomes having risen across income groups over the past two decades, even families of modest means can sustain a waiting son or daughter longer than before.

This explains the counter-intuitive pattern: the more educated you are, the higher your unemployment rate.The wait, however, takes a specific form. A multitude of graduates are preparing for government competitive examinations. Many state governments even sponsor and subsidize preparation for public service commission entrance exams.