• India is now the world’s fourth-largest economy, but weak job creation, stagnant wages and low private investment raise concerns about a middle-income trap.
• Recent youth protests and a renewed public focus on vocational jobs — welding, plumbing, machining — have reopened the debate on quality employment and the importance of technical skills.

• A situation where a developing country, after rapid growth on the back of cheap labour and catch-up industrialisation, is unable to transition to a high-income, innovation-driven economy.
• Wage costs rise, eroding the competitive advantage of cheap labour.
• The economy fails to shift towards higher productivity and innovation-based growth.
• Job creation weakens even as GDP grows — a phenomenon known as jobless growth.

Both views contain a kernel of truth but miss a deeper structural point: India’s problem is not simply supply-side or demand-side policy, but institutions shaped by social norms — norms that determine how markets set prices and incentives, and how the state allocates resources and provides public goods.

Why Both the State and the Market Are Underperforming

• Private capital, though freer from regulation than ever, competes mainly by cutting costs rather than innovating — it has failed to absorb the knowledge benefits typically associated with FDI.
• Capital is heavily subsidised relative to labour, which is economically inefficient in a labour-surplus country like India — it encourages capital-intensive rather than labour-intensive growth.
• India’s R&D spending stands at a mere 0.65% of GDP, and technology adoption remains slow and far from automatic.
• Despite the state’s growing size, its capacity to deliver even basic public services — health centres, schooling — remains among the weakest in the world.

India has historically underfunded mass/primary education while disproportionately subsidising higher education for elites. This same elite bias later shaped India’s post-reform, services-heavy growth model — allowing upper castes to dominate better-paying occupations while relegating low-productivity, low-status work to marginalised groups.

India’s Vocational Training Gap — Key Data

• Economist Joel Mokyr argues that economic growth depends on creating and spreading “useful knowledge” — practical skills that improve technology, innovation and productivity.
• India faces a problem because it often values degrees over technical and vocational skills.

• Demographic dividend at risk: India’s large working-age population can become a liability rather than an asset if skilling and job creation remain weak.
• AI and automation pressure: A steady decline in the labour intensity of production across sectors is likely to accelerate with AI adoption — making the skills question even more urgent.
• Social justice dimension: Since vocational undervaluation is tied to caste hierarchy, addressing it is also a matter of social equity, not just economic efficiency.
• Marriage market and social aspiration: Even institutions like marriage markets attach a premium to certain occupations, reinforcing the status hierarchy between “white-collar” and “skilled manual” work.

• Chronic underfunding and underutilisation of vocational training infrastructure (ITIs run at less than half capacity).
• Deep-rooted social stigma attached to manual and technical trades, discouraging enrolment even where jobs exist.
• Low R&D intensity (0.65% of GDP) limiting India’s innovation capacity.
• Capital-labour price distortion, where subsidised capital discourages labour-absorbing growth in a labour-surplus economy.
• Weak state capacity to deliver even basic public services, let alone drive an ambitious skilling mission.
• Elite capture of public education spending, historically skewed towards higher education rather than mass and technical education.