India’s Education and Employment Challenge

Reinventing Education: Proposal for an Education Stack in the Age of AI

India's "Generation-Z" cohort of 15-30-year-olds now numbers c.370 million¹. Access to high-quality education, professional training and white-collar employment has become a high stress national issue. The promise that a school education and college degree will lead to better jobs and higher incomes is looking increasingly distant to many young Indians.

This summer, large student protest erupted in Delhi and then spread across India demanding the resignation of the country's education minister over the leak of exam papers, which led to at least a dozen known student suicides. After a brutal crackdown by local police and the government banning the social media handles of the organisers, the government eventually relented and the minister resigned as the protest grew and spread both physically and online.

The country has not stood still; indeed progress has been made, but the numbers are staggering. India's education system has expanded significantly over the last 25 years. Primary education is now close to universal, while secondary and tertiary enrolment ratios have increased c.2x and c.4x respectively since 2000² . 110 million new college graduates have entered the workforce over the last 25 years, and another 182 million are projected to join them in the next 25 years³. However, the job market has not kept pace with this influx of talent. 40% of young graduates are unemployed⁴, while poor quality education and irrelevant curricula have left half of college graduates “unemployable⁵. The economy is not yet structured to absorb new talent at this scale.

The challenge is becoming more acute as AI changes the economics of knowledge work. Hiring growth has slowed across IT, financial services, and other professional services, while productivity gains from AI could further reduce demand for some roles. How India productively deploys its educated youth will be a critical determinant of whether it can reach upper middle-income levels over the next 25 years. This vocal and active mass of young people will also be a critical determinant of electoral results.

This paper analyses the key developments and gaps in India's education and employment ecosystem, and the challenges that lie ahead if the country is to realise the ‘demographic dividend' and productively deploy its young population.

India's Education and Employment Challenges and Gaps

While India has expanded access to education substantially, the next phase is harder: closing the gaps in capacity,quality and relevance while creating enough productive opportunities for the people coming through the system.

India has successfully created new capacity and increased enrolment rates substantially over the last 25 years and is close to universal primary education. Secondary school and higher education too have grown, but there remains substantial headroom for further growth if India is to catch up to large East Asian peers and developed country benchmarks.

Implication. India still needs to create school capacity for c.50 million 6-17-year-olds that are not in school ⁸, and c.25 million new college seats to meet its target of c.70 million college students by 2035 ⁹.

India has created some world-class schools and universities, including the IITs, but these serve only a small share of students. Most students remain in chronically underfunded government schools and universities with significant gaps in staffing and basic infrastructure. Nearly a million teacher posts are vacant, and many rural schools still lack basic sanitation and computing facilities.

Implication. Poor quality leads to poor learning outcomes: 69% of 5th graders in India's rural schools cannot do basic division and 55% cannot read at even a 2nd grade level. c.US$75 billion (2% of GDP) of incremental investment is required annually for India to upgrade existing infrastructure and achieve its spending target. The shortfalls and issues cannot be solved merely by spend.

India's youth face a major employment problem. Approximately 50% of college graduates are considered “unemployable”, while c.40% of young graduates unemployed. At the same time, youth unemployment is much lower among the uneducated, suggesting that job creation is concentrated at the lower end of the economic ladder, rather than in the white-collar roles for which graduates are training.

Implication. India needs both better education and faster creation of formal, productive jobs. The mismatch is particularly visible in medicine and law, where demand for places far exceeds supply, and in engineering and management, where the quality gap between the leading institutions and the next tier remains wide.

Over the last 25 years, the number of Indian adults with at least a high-school education has tripled to c.0.5 billion people. Rising secondary and tertiary enrolment means this pool will continue to expand rapidly, with another 388 million educated Indians expected to join the workforce over the next 25 years, including 182 million college graduates.

Implication. More than 15 million educated Indians will enter the workforce every year for the next 25 years. The skills they acquire and the opportunities available to them will determine India's economic trajectory.

Despite rapid economic growth, formal private sector employment has not kept pace with the growth in college graduates: only 36% of college graduates are currently employed in formal jobs. The mismatch is visible across professional education, including medicine and law, and in the intense competition for IITs and IIMs, which offer a relatively proven route into high-paying careers.

Implication. Formal employment will need to expand much faster to absorb both currently underemployed graduates and the next wave of entrants. India needs more specialised capacity where demand is clear, and higher standards across the next tier of engineering and management institutions.

The Way Forward: AI as Challenge and Tool of Reinvention

India's National Education Policy 2020 acknowledged many of these gaps in quantity, quality and relevance, with an emphasis on vocational and multidisciplinary education, technology and distance learning. Implementation and translation into classroom practice, learning outcomes and higher education structures, however, remains a work in progress.

AI now makes the challenge more urgent. Its impact is likely to be concentrated in many of the white-collar sectors on which India has relied for growth, including IT and software engineering, pharmaceuticals, financial services, law and professional services. These sectors already face insufficient job creation relative to the number of graduates entering the workforce. AI could increase productivity by 10-45% across Indian sectors, with particularly significant labour efficiencies in areas such as IT, healthcare and financial services. Without faster growth in demand, higher productivity could therefore translate into slower growth in new jobs in these sectors.

The National Education Policy 2020 provides a useful starting point, but the scale of the employment challenge and the speed of AI development require a more operational approach. The objective should be simple: create an education and training system that produces employable skills, connects young people to work earlier and enables them to adapt throughout their working lives, while creating enough productive opportunities to use those skills.

India has, however, solved a problem of this scale before. A decade ago, only a small percentage of its population accessed formal financial services reached. Through the Pradhan Mantri Jan Dhan Yojana (PMJDY) and its "India Stack", a set of open, interoperable digital public goods layered on Aadhaar, the country opened over half a billion new bank accounts²⁵ and made digital payments accessible to a billion people, faster than perhaps any country in the world. It did so not by building more bank branches, but by building digital public infrastructure that made serving the bottom of the pyramid cheap enough for the private sector to do it.

Today, the same radical thinking and execution is required, while leveraging AI to make it highly functional for its population.

The Education Stack: Five Layers

The “Education Stack” should be a fully integrated and open digital platform. Five layers seem critical – identity, verification, credit, consent and intelligence – to gives every participant a lifelong learner identity, verifiable credentials, portable credits, control over their own skills data and access to AI-enabled learning, all provided on an open access basis for institutions, employers and EdTech companies to build on.

I.Identity - The Presence-less Layer.APAAR²⁶ ("One Nation, One Student ID"), linked to Aadhaar, gives every learner a permanent academic identity from primary school through college, vocational training and lifelong reskilling.

II.Verification - The Paperless Layer. . Degrees, marksheets and certificates issued and verified instantly through DigiLocker²⁷ , with every high-stakes examination on an independent, digitally auditable trail, ending fake credentials and the leaks that triggered this summer's protests.

III.Transactions - The Credit Layer. The Academic Bank of Credits²⁸ does for learning what UPI did for payments: credits become an interoperable currency, transferable across institutions and between academic, vocational and work-based routes.

IV.Consent - The Opportunity Layer.The educational equivalent of the Account Aggregator framework²⁹ : a learner-owned profile of verified skills, shared only with consent, connecting graduates to employers, apprenticeships and lenders, including the financial India Stack for education loans.

V.Intelligence - The Classroom-less Layer.The new layer for the age of AI. Personalised AI tutors in India's 22 scheduled languages, delivered through the DIKSHA³⁰ and SWAYAM³¹ platforms, extending scarce teachers to every classroom and helping close a million-post vacancy gap.

As with finance, the role of government is to build the rails and open them up, allowing institutions, employers, EdTech companies and investors to build on the stack. The objective should be simple: an education system that produces employable skills, connects young people to work earlier and helps them adapt throughout their working lives, designed not for the economy of the last 25 years, but for the economy that AI is creating.

The current administration demonstrated that it could launch a revolution in the way finance touches the lives of every Indian through the PMJDY and India Stack. In the process it drove the participation of the mass population in finance, and this became an underpinning of the economic growth of the country. To do so, it mobilised and directed financial institutions to participate or lose their position to an aggressive timescale. It is time for that kind of revolution in education.

Conclusions

India has spent the last 25 years expanding access to education. The next 25 will be about what that education produces: skills, productivity and jobs. With more than 15 million educated Indians set to enter the workforce every year, the central question is no longer how many people India can educate, but whether the economy can productively employ them.

The policy response therefore needs to move from broad objectives to building the infrastructure for delivery. Just as the India Stack brought over half a billion people into the financial system, an Education Stack can give every young Indian a lifelong learner identity, trustworthy examinations and credentials, credits that move with them across institutions and into work, control over their own skills data, and access to AI-enabled learning in their own language. Built as open infrastructure, it would allow institutions, employers, EdTech companies and investors to do what government cannot do alone: add the c.25 million higher education seats India needs, mobilise the c.US$75 billion of additional annual investment, and connect millions of young people to the workplace each year, while making examinations, universities and outcomes transparent and accountable.

This is not simply an education agenda. It is an economic transformation agenda. And failure has political consequences. Success establishes another model for the rest of the world to share in.

India's ambition to become an upper middle-income economy by 2050 therefore depends very much on unlocking the potential of its human capital. The test over the next decade should be tangible: more children learning effectively, more young people gaining work experience before graduation, more graduates entering productive employment and more businesses using technology to raise productivity. That is the transition from a demographic dividend in theory and prospect, to a demographic dividend in practice.

India's opportunity is large, but the window will not remain open indefinitely. India has the young population, digital infrastructure and entrepreneurial base to build a much more productive economy. The task now is to connect them through an education and employment system designed not for the economy of the last 25 years, but for the economy that AI is creating.

1. United Nations, Department of Economic and Social Affairs, Population Division. (2024). World population prospects 2024: Online edition. https://population.un.org/wpp/

2. World Bank. (2026). World development indicators [Data set]. World Bank DataBank. https://databank.worldbank.org/source/world-development-indicators

3. KC, S., Dhakad, M., Potancokova, M., Adhikari, S., Yildiz, D., Mamolo, M., Sobotka, T., Zeman, K., Abel, G., Lutz, W., & Goujon, A. (2024). Updating the Shared Socioeconomic Pathways (SSPs) global population and human capital projections (IIASA Working Paper WP-24-003). International Institute for Applied Systems Analysis. https://pure.iiasa.ac.at/19487

4. Ministry of Statistics and Programme Implementation. (2024). Periodic labour force survey (PLFS): Annual report, July 2023-June 2024. Government of India. https://www.mospi.gov.in/

5. Ministry of Finance, Government of India. (2024). Economic survey 2023-24. Department of Economic Affairs. https://www.indiabudget.gov.in/economicsurvey/

6. World Bank. (2026). World development indicators [Data set]. World Bank DataBank. https://databank.worldbank.org/source/world-development-indicators

7. Department of School Education & Literacy, Ministry of Education, Government of India. (n.d.). UDISE+: Unified District Information System for Education Plus. Retrieved September 28, 2026, from https://udiseplus.gov.in/#/en/home

8. Mehta, A. C. (2026, March 14). . Out-of-school children in India: A comprehensive analysis based on UDISE+ 2024-25. Education for All in India. https://educationforallinindia.com/wp-content/uploads/2026/03/out-of-school-children-India-UDISE2024-25-aruncmehta.pdf

9. Cabinet Secretariat, Government of India. (2020, July 29). Cabinet approves National Education Policy 2020, paving way for transformational reforms in school and higher education systems in the country [Press release]. Press Information Bureau. https://www.pib.gov.in/PressReleaseDetail.aspx?PRID=1642049

10. World Bank. (2026). World development indicators [Data set]. World Bank DataBank. https://databank.worldbank.org/source/world-development-indicators

11. ASER Centre. (2025). Annual status of education report (ASER) 2024: National findings. Pratham. https://asercentre.org/wp-content/uploads/2022/12/ASER-2024-National-findings.pdf

12. Department of School Education & Literacy, Ministry of Education, Government of India. (n.d.). UDISE+: Unified District Information System for Education Plus. Retrieved September 28, 2026, from https://udiseplus.gov.in/#/en/home

13. Nandy, S. (2023, December 6). Education Ministry reports over 8 lakh teaching vacancies in govt schools. News18https://www.news18.com/education-career/education-ministry-reports-over-8-lakh-teaching-vacancies-in-govt-schools-8692309.html

14. Institute for Human Development, & International Labour Organization. (2024). India employment report 2024: Youth employment, education and skills. International Labour Organization. https://www.ilo.org/publications/india-employment-report-2024-youth-employment-education-and-skills

15. Ministry of Statistics and Programme Implementation. (2024). Periodic labour force survey (PLFS): Annual report, July 2023-June 2024. Government of India.https://www.mospi.gov.in/

16. Ministry of Finance, Government of India. (2025). Economic survey 2024-25. Department of Economic Affairs. https://www.indiabudget.gov.in/economicsurvey/

17. KC, S., Dhakad, M., Potancokova, M., Adhikari, S., Yildiz, D., Mamolo, M., Sobotka, T., Zeman, K., Abel, G., Lutz, W., & Goujon, A. (2024). Updating the Shared Socioeconomic Pathways (SSPs) global population and human capital projections (IIASA Working Paper WP-24-003). International Institute for Applied Systems Analysis.https://pure.iiasa.ac.at/19487

18. Institute for Human Development, & International Labour Organization. (2024). India employment report 2024: Youth employment, education and skills. International Jones Lang LaSalle https://www.ilo.org/publications/india-employment-report-2024-youth-employment-education-and-skills

19. Waghmare, A. (2026, May 15).How big is India's formal sector? Data For India.https://www.dataforindia.com/informal-sector-sizing/

20. Indian Express. (2025, June 14).NEET UG 2025 result declared. The Indian Express.https://indianexpress.com/article/education/neet-ug-2025-result-declared-neet-nta-nic-in-cut-off-air-list-10064756/

21. Indian Institute of Technology Kanpur. (2025). Joint Implementation Committee (JIC) report: Joint Entrance Examination (Advanced) 2025 (Vol. 1). Joint Entrance Examination (Advanced). https://jeeadv.ac.in/reports/2025.pdf

22. Indian Institute of Management Calcutta. (2024, December 19). CAT 2024 media release. Common Admission Test. https://iimcat.ac.in/per/g06/pub/32842/ASM/WebPortal/1/PDF/2024_CATMedia_Release_19Th_Dec2024.pdf

23. Garg, I. (2025, December 16).How many students appeared for the CLAT 2026 exam? Careers360. https://law.careers360.com/articles/how-many-students-appeared-for-the-clat-2026-exam

24. Ernst & Young India. (2025, January).The AIdea of India: 2025 — How much productivity can GenAI unlock in India? EY. https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/services/ai/aidea/2025/01/ey-the-aidea-of-india-2025-how-much-productivity-can-gen-ai-unlock-in-india.pdf

25. Department of Financial Services, Ministry of Finance, Government of India. (n.d.). Pradhan Mantri Jan-Dhan Yojana. https://law.careers360.com/articles/how-many-students-appeared-for-the-clat-2026-exam

26. Ministry of Education, Government of India. (n.d.). APAAR (Automated Permanent Academic Account Registry): One nation, one student ID card. https://apaar.education.gov.in/

27. National e-Governance Division, Ministry of Electronics & Information Technology, Government of India. (n.d.). DigiLocker. https://www.digilocker.gov.in/

28. Academic Bank of Credits. (n.d.). Academic Bank of Credits. https://www.abc.gov.in/

29. Department of Financial Services, Ministry of Finance, Government of India. (n.d.). Account Aggregator framework. https://financialservices.gov.in/account-aggregator-framework

30. Ministry of Education, Government of India. (n.d.). DIKSHA: Digital Infrastructure for Knowledge Sharing. https://diksha.gov.in/index.html

31. Ministry of Education, Government of India. (n.d.). SWAYAM: Study Webs of Active-Learning for Young Aspiring Minds. https://swayam.gov.in/