Sunday, 11 Oct, 2026
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The immediate fear is that AI will destroy jobs. India’s bigger challenge is more basic: creating enough productive, reasonably secure jobs for its expanding pool of educated workers
The labour participation rate among Indians with graduate-level or higher education fell to 52.26 per cent in September, its lowest level in at least 60 months, according to Business Standard, citing data from the Centre for Monitoring Indian Economy. The last time it was this low was in October 2021.
The measure captures the share of the graduate-level and higher-educated population that is either employed or actively seeking work. Its decline is striking because employment itself has risen.
CMIE estimates that around 100 million Indians with graduate-level or higher education are employed, more than 21 million above September 2025. That suggests the economy has continued to create jobs despite US-Iran tensions, higher energy prices and the economic strain caused by the West Asia war.
But more than 3 million fewer people were actively seeking jobs than a year earlier.
That is the more revealing number. A person who stops looking for work disappears from the unemployment count, but does not necessarily become economically better off. The fall in active job seekers may therefore reflect not just employment gains, but weaker expectations about the jobs available.
The composition of employment strengthens that concern. Salaried jobs account for around a quarter of total employment, while small traders and wage labourers make up larger shares. Farmers and businesses account for lower shares. Overall, these categories each represent roughly 22-25 per cent of total employment.
For an expanding graduate population, the gap between education and the availability of suitable work matters. A graduate entering a labour market dominated by informal, self-employed or lower-productivity work may either accept employment below expectations or withdraw from the search altogether.
The three-year numbers show how that mismatch has developed. The population with graduate-level or higher education grew 28.6 per cent, according to a Business Standard analysis of CMIE data. Employment among people with that level of education grew 26.8 per cent, covering all forms of work, including farming and wage labour.
Salaried employment grew by just 11.9 per cent across all levels of education.
That is the crucial gap. The educated population is expanding faster than employment, while the growth of salaried jobs is lagging much further behind. The number of unemployed graduates and people with higher education who are actively seeking work has consequently declined at a compound annual rate of 4.1 per cent over the past three years.
Fewer unemployed people can be good news. But not when part of the decline comes from people leaving the labour market.
This also changes the way the AI debate should be framed. The immediate concern is whether artificial intelligence will destroy jobs. India’s more fundamental problem is whether it can create enough productive, reasonably secure employment for the educated workforce it is already producing.
External pressures make that task harder. The West Asia war and higher energy prices can raise business costs, while tensions between the US and Iran add to uncertainty. Companies facing higher costs and uncertain demand may become more cautious about hiring even as AI changes the skills they require.
India’s demographic advantage will not translate automatically into faster growth. It depends on people entering the workforce, finding productive employment and earning enough to support consumption and investment.
The government’s Periodic Labour Force Survey began providing monthly data in 2025, with August 2026 marking the 17th observation. CMIE’s longer series points to a declining trend in labour participation among the graduate population. Differences in sampling, methodology and the period covered can affect the results, so individual monthly movements should not be over-interpreted.
The broader signal, however, is hard to miss. India is creating more jobs for graduates, but the educated population is growing faster and salaried employment is growing much more slowly.
The economic test is therefore not simply whether India can employ more people. It is whether it can create enough good-quality jobs to keep its educated population participating in the workforce.
