6 min readSep 29, 2026 12:26 PM IST First published on: Sep 29, 2026 at 12:26 PM ISTIndia may be the only country in the world to respond to the challenge of educated unemployment among the youth through state-level cash transfers. At least 10 state governments have introduced such programmes, which shows how the youth, along with women and farmers, have emerged as the most critical political constituency in India. Not surprisingly, nearly all programmes were rolled out around the time of state assembly elections.The programmes vary considerably in their eligibility; some are explicitly targeted at graduates, like Karnataka, Rajasthan, and Assam. The cash transfers are meant to provide a temporary income bridge for young jobseekers as they search for employment. Some states provide income support to a broader base of educated youth, like Haryana, Uttar Pradesh, Bihar, West Bengal, Chhattisgarh, and Kerala, which have programmes for those who have completed secondary or higher-secondary education and above, though the amounts for graduates are higher. Tamil Nadu, which has one of the oldest-running programmes for unemployed youth alongside Kerala, has announced an ambitious upgrade for unemployed graduates under the new TVK government.AdvertisementAlso Read | Give India’s poor cash. But don’t stop thereThe conditionalities also vary. A graduate in Karnataka under the age of 35 is eligible for a monthly allowance of Rs 3,000 for a period of two years under Yuva Nidhi, along with access to skill-based training. Rajasthan’s Yuva Sambal combines cash with skill training and a mandatory internship in a government department. Kerala’s Connect to Work links assistance of Rs 1,000 per month for one year to mandatory skill training or preparation for competitive examinations. These conditionalities bring the programmes closer to active labour market policies, combining income support with training and work experience to improve employability, though their effectiveness is not clear. So far, the evidence from states like Karnataka suggests that uptake for skilling and training has been slow.Underlying these programmes is the implicit recognition that the transition from education to employment has become more prolonged and uncertain. Less than 7 per cent of male Indian graduates manage to find a permanent salaried job within a year, according to the State of Working India report (2026), and the Economic Survey points out that only 8.25 per cent of graduates are employed in roles aligned with their qualifications.Graduate unemployment in India has taken on the contours of a “wicked problem”. The graduate unemployment rate in India at 29.1 per cent is nine times higher than for those who cannot read or write, according to a 2024 report by the International Labour Organisation. This is largely attributed to queuing behaviour, as educated youth delay accepting low-paying or informal work while they wait for jobs that match their qualifications and aspirations. At the same time, the economy is unable to generate enough formal, quality jobs to absorb the growing educated workforce.AdvertisementIndia is not the only country to have a glut of unemployed graduates and youth. China is a useful comparison in terms of population size. Its youth unemployment rate was 17.9 per cent in July 2026 among 16-24-year-olds excluding students. China has also been producing more than 10 million graduates each year since 2022, a scale comparable to India. China, like India, is struggling to align graduate skills with an evolving labour market. The situation has worsened due to AI’s potential impact on entry-level jobs. Youth unemployment in developed countries is also high, with the United Kingdom at 16.2 per cent and the EU at 15.1 per cent.Countries are responding in different ways to this generation of “would-be workers.” China introduced policy measures in 2025, including subsidies to employers hiring college graduates and unemployed youth, and expansion of vocational training programmes to improve the employability of youth. India, too, is expanding and upgrading vocational training with programmes like PM-SETU and introducing new policy instruments, like the Pradhan Mantri Viksit Bharat Rozgar Yojana, which promotes formal job creation and provides a cash benefit of Rs 15,000 to first-time employees, and an employer incentive through monthly cash payouts of up to Rs 3,000 for every new employee.However, unconditional cash transfers to unemployed youth are not the prevailing policy response internationally. It seems to have taken root in a political economy context where cash transfers have become a popular welfare instrument in the country, and an essential electoral tool, despite government surveys raising concerns about fiscal sustainability. The expansion of cash transfers has also raised concerns about trade-offs with other development priorities like education and health. A fiscally constrained state like Jharkhand spends around half of its social welfare budget on unconditional cash transfers alone.you may likeThis year’s Economic Survey also flagged the longer-term effects of unconditional transfers on incentives for self-improvement, upskilling and employability. While the Survey focuses on transfers targeting women, the question is even more relevant to the emerging use of cash transfers for unemployed youth: Can they disincentivise job search and lengthen unemployment spells?As many of these programmes are still new and have been introduced without rigorous evaluation or monitoring, it is difficult to know their impact. Administratively, cash transfers are easier to execute than creating jobs. The question is, what is the policy purpose of providing unconditional cash transfers to unemployed youth? If the objective is to provide a temporary income bridge while they search for work, or enable them to invest in skills and improve their employability, then these programmes can be considered valid short-term labour market interventions, rather than substitutes for job creation.The writer is director and senior fellow, Centre for New Economic Diplomacy, Observer Research Foundation