India’s demographic dividend ~ a young and expanding workforce ~ has long been touted as its greatest economic strength. With 65 per cent of the population under 35, the country has a unique advantage over aging economies like Japan, South Korea, and much of Europe. However, merely having a youthful population does not guarantee economic success. The Union Budget must go beyond rhetoric and deliver concrete measures to translate this potential into sustained growth. The government has introduced several initiatives in recent years, such as the PM Internship Scheme and Employment Linked Incentives, aimed at boosting youth employment. Yet, these efforts remain limited without substantial private sector participation. Job creation cannot be driven by government policies alone; it requires strong private capital investment.
A worrying sign has been the decline in foreign direct investment (FDI) over the past few quarters. This trend must be reversed through tax reforms, a streamlined approval process for investors, and an improved ease of doing business. India’s economic growth must be employmentled, not just consumption-driven. While government spending can provide a short-term boost, sustainable job creation depends on fostering entrepreneurship and attracting businesses. Without private sector expansion, young workers will struggle to find stable, well-paying opportunities. One major roadblock to job creation is India’s complex labour laws, which deter large scale hiring. Simplifying compliance requirements and making termination policies more flexible ~ while ensuring worker protections ~ could encourage businesses to expand and employ more people.
Capital gains tax reductions and sector-specific incentives for manufacturing, green energy, and digital industries can further attract investment. Job creation alone is insufficient if the workforce remains unprepared. According to the India Skills Report 2024, over half of employable youth lack the necessary skills for available jobs. This disconnection between education and industry needs to be urgently addressed. The Budget must allocate greater resources for research and development, digital infrastructure, and targeted skill training in emerging technologies such as artificial intelligence, data science, semiconductors, and renewable energy. While the Atal Tinkering Labs have made strides in fostering STEM education, they remain limited in scope. Expanding these labs nationwide could nurture scientific temper from an early age.
The PM Internship Scheme, currently restricted to individuals aged 21-24, should be widened to include those aged 18-26, ensuring a broader section of youth gains industry exposure. A key pillar of long-term workforce development is education reform. The National Education Policy (NEP) 2020 lays the groundwork for a more flexible and skills-oriented system, but its implementation remains uneven. Budget 2025-26 must push for nationwide adoption and ensure adequate funding for government schools, where learning outcomes have stagnated. Performance-linked incentives for teachers could help drive better results. India’s youth will drive the nation’s economic future, but their success depends on the right policies. The Budget must prioritise private investment, skill development, and education reforms to fully capitalise on the demographic dividend. Without bold action, the country risks squandering its greatest economic advantage.