Is Being Unemployed in India Costlier Now?

Lorraine Regi M and Dr. Sovik Mukherjee

Background

Education remains as a significant driver of change, shaping opportunities and empowering individuals. People pursue it to gain skills, improve their prospects, and secure meaningful employment. Higher education in India has long been the main avenue for social mobility and access to new opportunities, offering a brighter outlook for millions seeking a better life. Lately, the promise that education ensures for a better future is being called into question. For many students and their families, pursuing higher education has become financially challenging, as tuition and other costs have increased substantially.

Despite this investment, it is no longer certain that a degree will lead to a stable job. Graduates often end up waiting for suitable employment, or they take jobs that don’t match their degrees at all. This growing gap between educational achievement and employment outcomes raises an uncomfortable concern that warrants immediate policy action. If degrees no longer secure livelihoods, higher education risks becoming a costlier way of remaining unemployed

Trends in Higher Education Expansion in India

In recent years, higher education in India has expanded at an unprecedented rate. Now, more than 100 million adults aged 25 and older hold a graduate degree or its equivalent, exceeding China’s total (World Bank, 2023). India’s Higher Education Institutions (HEIs), which include universities, colleges, standalone institutions, and R&D centers, increased by almost 13.8%, from 51,534 in 2014–15 to 70,018 by June 2025, to accommodate the growing number of students. Colleges grew from 38,498 to 52,081, universities from 760 to 1,338, and IITs from 16 to 23 (PIB, 2025). With over two crore women pursuing higher education, female enrolment also increased significantly, indicating progress toward gender parity.

Rising Price of Education

The cost of education has increased dramatically alongside institutional growth, as more families pursue academic credentials, turning education from a straightforward milestone into a long-term financial burden. Household spending on education in India increased 4.6 times in just 12 years, from about ₹1.8 lakh crore in FY12 to ₹8.43 lakh crore by FY24, according to MoSPI household consumption data. This increase far outpaced general inflation and reflected bigger changes in spending patterns. Simultaneously, per capita household education spending increased from approximately ₹1,500 in FY12 to approximately ₹6,100 by FY25, suggesting that more money than ever before is being spent on education, tuition, coaching, books, transportation, and related expenses.

This trend happens not only in higher education but also in the earliest years of schooling, where elite private schools in major metro cities can now cost several lakh rupees for a single phase of education. As a result, educational inflation is now a reality that affects how families budget, make investments, and even give up other goals in order to pursue academic credentials.

The Story of Credential Inflation

However, this growth in higher education hides a growing concern: have these degrees prepared these graduates to enter the workforce? As higher education expands and, consequently, the supply of educated personnel increases, degrees lose their ability to distinguish candidates in the job market, leading to credential inflation.

Credential inflation is the devaluation of tertiary education degrees. The expansion of higher education has been driven primarily by the changing value of educational degrees in the job market. As the number of persons with academic degrees has increased, the occupational level for which they have qualified has declined. It forces people to obtain higher qualifications to stay competitive, even when the actual work hasn’t changed. What used to signal capability has turned into a basic requirement. Degrees are now used less to show skill and more to scrutinize applicants in an oversaturated job market.

Education, in this regard, is like a device that keeps the surplus of labor confined to the youth who are turned into economically inactive but statistically “engaged” at some level of education. The situation compels students to add to their qualifications, which only extends the period of their being unemployed without giving them better job prospects. What looks like an investment in human capital is, in fact, a socially acceptable way of postponing unemployment. This postponement transfers the cost of labor market failure from the economy to households and ​‍​‌‍​‍‌​‍​‌‍​‍‌individuals.

Costly Unemployment

The​‍​‌‍​‍‌​‍​‌‍​‍‌ main reason why credential inflation is a threat to the economy is not only the shortage of jobs but also the rising cost of waiting. More and more degrees are becoming common and expensive, while the returns to graduates in the labor market are weakening. In 2023, among urban youth aged 20–29, nearly one in three graduates with formal degrees were unemployed (PLFS), indicating a paradoxical situation for graduates.

As the cost of higher education continues to rise while its value as a labour-market signal steadily erodes, unemployment itself has become increasingly expensive. Periods of joblessness are now often financed through family savings, personal debt, and the postponement of key life transitions such as marriage, home ownership, or further skill acquisition.

Consequently, the central policy concern is shifting away from mere access to education toward the quality of post-education outcomes, particularly employability, income stability, and long-term economic security.

What’s Ahead? Rethinking the Role of Education

There is a growing gap between education and opportunity, as seen by the fact that many graduates are still unready to meet job demands despite the increase in qualifications. If current trends continue, India risks normalizing a system where education is expensive, prolonged, and increasingly disconnected from employment. The solution cannot be just more degrees — a complete rethink of how education delivers value.

 The actual educational and credential inflation problem solution is not to have students increase their expenses for certificates or add-ons that enhance inequality. Skill-based courses paid for by individuals may be out of reach for many families, and if companies select candidates based on additional credentials, the system privileges the already privileged.

In recent years, digital learning platforms have further expanded the possibilities for skill acquisition. The National Programme on Technology Enhanced Learning (NPTEL), jointly run by IITs and IISc, has emerged as a powerful tool in this regard. By offering high-quality online courses in engineering, management, data science, economics, and other emerging technologies, NPTEL democratises access to advanced skills. Its certification courses, often aligned with industry needs, help learners signal competence to employers at a relatively low cost.

NPTEL and other similar platforms also address regional and socio-economic barriers to education. Learners from smaller towns and disadvantaged backgrounds can acquire market-relevant skills without relocating or incurring high expenses. In this sense, such platforms reduce the opportunity cost of unemployment by enabling continuous upskilling during periods of job search.

However, skills alone are not a panacea. First, the change must occur within the curriculum itself. In addition, the effectiveness of such programmes also depends on their integration with industrial policy, labor market reforms, and job-creation strategies.

Fundamental skills, proper experience, and problem-solving abilities should be given to students through their regular education so that every graduate will be employable without an extra financial ​‍​‌‍​‍‌​‍​‌‍​‍‌burden. And not create a chain of marks, exams, and nominal degrees.

Conclusion

To sum up, universities and industry need to work more closely together. Educational programs should be designed in collaboration with employers, thereby making students’ involvement in internships, live projects, and skill assessments that reflect real-world requirements integral to the program.

Tests/assessments should not rely solely on memorization; it should also assess practical skills and the application of knowledge, thereby establishing a clear link between the learning process and the likelihood of securing employment.

If India integrates skill-driven, job-focused learning as a regular part of education, it will be able to lessen the requirement of obtaining an endless number of qualifications, keep the costs under control, and make education a real way to move up the social ladder — thus making sure that talent, and not wealth, is the factor which determines the access to getting a job that has a ​‍​‌‍​‍‌​‍​‌‍​‍‌value.

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