Education and labour market: estimating future skill gap in India

Demographic transition creates a small window for countries when the population pyramid shows signs of maturity and bulges in the middle, indicating a relatively larger share of working age population. Key to reaping this demographic dividend lies in using the working age population to fullest potential and enhance production to the maximum possible. However, this can become a nightmare if skill demand and supply in the labour market do not match, keeping large portion of the working age population out of productive engagement while at the same time some productive sectors suffer from labour shortage in key areas. In this paper we look at the issue of estimating skill gap in the Indian labour market starting with the methods currently available globally. It then attempts to project both future labour demand and labour supply by sector and skill group and study the expected surplus/shortages in labour market. Results indicate that methodologies are still in the nascent stage and surplus and shortages are likely to coexist in the labour market. While some specific skills are scarce, others are in surplus, indicating the importance of taking a hard look at the manpower policy, including the education policy. It is crucial to bridge the gap between education, training and employment so that promised demographic dividend can actually materialise.