Skill Gaps, Labour-Market Mismatch And Productivity Growth In India: A Review Of Evidence
Keywords:
skill development; workforce productivity; sectoral skill gaps; regional economic growth; vocational education and training; labour-market mismatch; India.Abstract
Skill development is a route through which India can convert a working-age population into higher productivity,
better jobs and regionally balanced growth. Yet training completion is not equivalent to skill acquisition, labour
market matching, firm adoption or productivity improvement. This review assesses past econometric and
evaluation evidence on the relationships among vocational and technical training, workforce productivity,
sectoral skill gaps and regional economic growth in India. It synthesizes peer-reviewed studies, official labour
statistics, programme evaluations and skill-gap diagnostics published from 2000 to 2023. The review finds
relatively consistent evidence that formal vocational training is associated with higher earnings, although returns
differ sharply by sector, employment status, location, gender and training duration. Experimental evidence also
shows that a targeted programme can improve women’s employment and earnings, whereas broader programme
evaluations report modest and uneven effects when training quality, local job demand, placement support and
employer engagement are weak. State-level studies generally link human capital to productivity and growth, but
service and manufacturing responses differ and causal attribution remains difficult. Recent Indian skill-gap work
demonstrates why national training targets are insufficient: demand is occupational, sectoral and spatial, while
supply is mediated by school quality, apprenticeships, digital access, migration and firm capability. The paper
therefore develops a transparent econometric assessment framework using state–sector–year panels, outcome
specific measures and fixed effects, rather than claiming a new causal estimate. It concludes that India needs
demand-led, regionally differentiated skills systems that pair training with workplace learning, technology
diffusion, productive investment, inclusion and credible outcome measurement.
