Why the Skill India Initiative Has Lost Its Way

The Indian government is the lead financier of vocational education and training in India with relatively little contribution from the formal private sector.

Meanwhile, the vast majority of young Indian youth, after a lackadaisical school education, either end up in the informal sector as trainees – often without a stipend – or in the government skill development ecosystem.

There are five options for young people in India who wish to acquire vocational education or training. First, Industrial Training Institutes, of which there are around 14,000 (mostly private);  second, acquire some vocational education in classes 9 to 12 (optional single course, not a stream of vocational education); third, one of the short-term government-funded programmes of the Ministry of Skill Development & Entrepreneurship (Prime Minister’s Kaushal Vikas Yojana); and fourth, another Union ministry programme like Ministry of Rural Development’s Deen Dayal Upadhyaya Grameen Kaushalya Yojana. A fifth option is public-private sector funded apprenticeship programmes for a year or two.

The third option noted above, of enrolling in a short-term training course from private training providers, is usually financed through the National Skill Development Corporation (NSDC) – a public-private partnership (PPP) created by the Union government’s Ministry of Skill Development and Entrepreneurship.

However, the NSDC has been in the news for the wrong reasons. Key positions of the CEO and Chairperson in the NSDC have been vacant for years. This is telling of what might be going on in skill development in the country and how serious we are in harnessing our demographic dividend in a world threatened by artificial intelligence.

Leadership has been a weak link in the Skill India initiative. In May 2025, the NSDC put out a public notice saying that its COO (officiating CEO), Ved Mani Tiwari, had been terminated. Media reports suggest that the individual acting as CEO was never officially appointed and was eventually terminated for appropriating the title – all under the government’s watch.

Nearly all of NSDC’s operations are funded by government budget allocations, primarily through the National Skill Development Fund. 

So far more than Rs 10,000 crore has already been spent on Skill India, a substantial portion of which is through NSDC. NSDC’s primary function has been to incubate private vocational training providers (VTPs) and sector skills councils (SSCs) to mobilise industry participation through the 36 SSCs in various organised sector activities.

In 2015, the NSDC was called out by the Comptroller and Auditor General (CAG) for a host of operational irregularities. However, it has been even more opaque since 2021. 

Its annual report indicates that it started a new company called ‘NSDC International’ in 2021, which primarily uses the NSDC’s financial resources for its work. 

It is important to note that NSDC was created through a cabinet-approved note. However, it is not clear if NSDC International had the due approval of the cabinet. 

The need for a separate company may also not be justified as there seems to be nothing that the new company can do which its parent company, the NSDC, cannot. 

Furthermore, does the government have any oversight over NSDC International? Does it have a role in its management and financial issues? This question arises from the fact that NSDC International’s financial statements or annual report are not in the public domain.  

The CAG audits of NSDC and its bodies have been under  wraps for a long time. It is time that financial accountability for the use of government funds is established. This scrutiny should extend to NSDC International, given the lack of transparency around its financial records.

Further, from the financial records publicly available, it seems that during Tiwari’s term, there was a change in financial accounting methodology of the NSDC. Accountants would need to see why and how it was done. Was it done to show a superior financial performance of NSDC to its board and stakeholders ?

NSDC since 2008 has incurred substantial costs on developing technology systems. These include the implementation of large scale programs such as Aatamanirbhar Skilled Employee-Employer Mapping (ASEEM) and the SMART portal among others. However, the country has always needed a Labour Market Information System (LMIS). 

While it was MSDE’s job to give India a working LMIS, it seems that the Ministry of Labour, the parent ministry of MSDE, will deliver on this through its National Career Service portal, designed to provide career guidance and job opportunities to job seekers in India. 

One must also look at how technology-related expenditures occured – and why the same kind of functionalities were packaged in different ways in the products made through NSDC – while ignoring the core need of collecting real time labour market information. 

As skill development in the country becomes more public funded – with the Union Budget for 2025–26 raising the allocation from around Rs 20,000 crore to Rs 36,000 crore – the organisations responsible for these funds have to ensure they are used effectively. 

They must support the youth, state governments and people working on the ground and provide them the resources they need. However, the NSDC’s engagement with government stakeholders over the years has often been less than cordial. This may have had lasting consequences for coordination and implementation.

Given that the 6,000 short-term training providers in the private sector are funded by NSDC’s PM Kaushal Vikas Yojana (PMKVY) – which has had four incarnations since 2016 (PMKVY I, II, III & IV) and  is one of the largest training providers largely funded by the tax-payer – NSDC operations should be a matter of citizen concern. 

Studies have shown that NSDC-funded training providers’ employability record has been less than stellar at only 22% over its lifetime.

The demographic window for India is shrinking. We now have only 15 years until 2040, when the demographic dividend will end and India will become an aging society. If we stay on the current path, we will find ourselves looking back to examine what we could have achieved with better policies.

India’s youth will face an onslaught in the labour market with the once-in-a-century changes made by artificial intelligence. The world of work is changing and Indian youth needs the right leadership in the skills ecosystem to help them navigate the challenges that lie ahead.

Santosh Mehrotra was Prof of Economics at Jawaharlal Nehru University, New Delhi.

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