5 min readAug 23, 2026 07:27 AM IST First published on: Aug 23, 2026 at 07:07 AM ISTIn the nationwide protests that followed the leakage of the NEET paper, students had demanded more than just a fair examination system. They had highlighted the poor quality of higher education and the challenge of youth unemployment. While the youth are right to perceive the education system as ripe for drastic reforms, it would be appropriate not to attribute all of current unemployment to poor education. Two strands of evidence suggest this. First, unemployment in countries with far superior educational systems is higher than in India today — Finland and Sweden being two examples. Within India, there is Kerala, which has a better-educated workforce but still has a high youth unemployment rate. Second, if educational qualifications and skills are scarce in India, the real wage of skilled workers must rise, but we see little of that happening currently. Even in India’s IT sector, apart from those with AI-related competency or working in the Global Capability Centres of multinationals, wage increases for the remaining employees are not particularly high. This is not to say that education and skills do not matter. They matter for productivity. Economy, though, is related to aggregate demand for goods. The demand for labour is a derived demand; it exists due to a demand for goods.Everything points to a slowing of aggregate demand growth in India over the last decade. Seven out of the 11 sectors at the initial level of disaggregation of national income slowed, three grew at the same rate as before, and only one grew faster. The sector that grew faster was real estate, which is neither large nor one employing many. With such a comprehensive slowdown in the economy, a slackening in the demand for labour would have occurred. But why did the economy slow? Both short-term and long-term factors are responsible. There is by now sufficient evidence to show that the trigger was the demonetisation of 2016. Growth slowed annually over the next three years before output actually contracted in 2020-21 due to Covid. As expected, the economy rebounded after the lockdown, but that could not prevent a decline in the average growth rate.