While India has a large institutional network for vocational education and training (VET), there are systemic issues such as poor perception, weak industry linkages, inadequate quality, and low public investment. Studying VET systems of Germany, Canada, and Singapore – with diverse features that shape worker productivity and employment outcomes – Afridi and Chandna draw policy lessons for overhauling India’s vocational education system.

India’s vocational education and training (VET) system is central to improving labour productivity, yet a key paradox persists: while the share of unskilled workers has declined, the proportion of formally trained workers has stagnated (Periodic Labour Force Survey (PLFS), 2017-18 to 2023-24), and productivity growth remains modest (Afridi et al. 2025). The cross-country evidence suggests that the quality of skill training in India may not be adequate enough to translate into high-skilled employment (Afridi and Chandna 2026). This reflects not just a shortage of skills, but also poor quality and weak alignment of training with labour market needs.

India’s skilling challenge 

Despite a large institutional network of over 14,000 Industrial Training Institutes (ITIs) and significant seat capacity, utilisation is low at around 48%, and employment outcomes are extremely weak, with placement rates as low as 0.09% (NITI Aayog, 2023). These outcomes point to systemic issues, including poor perception of vocational education, weak industry linkages, inadequate training quality, and low public investment. India spends only about 3% of its education budget on VET in 2021 (Ministry of Education, 2022), whereas countries such as Germany, Canada, and Singapore allocate around 10-13% of their education expenditure to vocational training in 2020 (Organisation for Economic Co-operation and Development (OECD), 2023; Singapore Department of Statistics, 2024).

International experience

We study three diverse VET systems that vary in the timing of VET integration and institutional design, which shape their employment and labour productivity outcomes.

Early Hybrid VET (Germany): Germany introduces VET at the upper-secondary level, combining classroom instruction with structured apprenticeships in firms. This model is characterised by strong employer involvement in training, financing, and curriculum design, along with nationally standardised certifications that ensure high skill portability (OECD, 2023).

Tertiary-Hybrid VET (Canada): Canada has a VET model at the post-secondary level, where community colleges offer applied diplomas and certificates integrated with work-based learning such as internships and co-op programmes. Employer involvement is more limited and largely advisory, and certification portability varies across provinces due to decentralised governance (OECD, 2023, Skolnik 2021).

Tertiary VET (Singapore): Singapore adopts a tertiary VET model through a dual-track system (Institute of Technical Education (ITE) and Polytechnics), supported by strong State funding and industry advisory mechanisms. It features clearly defined progression pathways, allowing students to move from the ITE to Polytechnics and further to universities, along with opportunities for lifelong learning (UNESCO-UNEVOC, 2021).

Figure 1 shows that countries with a higher share of VET-trained adults are associated with higher employment rates, and notably, those where VET is concentrated at the upper-secondary level lie above the ‘fitted line’, indicating stronger employment outcomes for countries that introduce VET at earlier stages of education. This is reinforced by evidence on productivity in Figure 2, where countries with upper-secondary (early) VET also exhibit higher average labour productivity than those where VET is concentrated at the post-secondary level, in 2021.

Figure 1. Cross-country comparisons: Employment rate and VET share (2021)

Source: Data on the share of adults with vocational education or training and employment rates are taken from International Labour Organization (ILO), 2026 and OECD, 2023. Authors’ calculations.

Notes: (i) ILO data are used to compute the share of youth (15-54 years of age) with vocational education or training and to derive employment rates (from unemployment rates, 15+ age group) for 2021. (ii) Countries are classified by dominant VET level among adults aged 25-34 based on ‘Education at a Glance, 2013’. (iii) Sample size includes 29 OECD countries and Singapore.

‍Figure 2. Average labour productivity across countries at the dominant level at which VET Is offered (2021)

Source: Data on productivity are from ILO (2025) and VET classification is based on OECD (2023). Authors’ calculations.

Notes: (i) Labour productivity is measured as output per hour worked (GDP (gross domestic product) in constant 2021 international dollars, PPP (purchasing power parity)), based on ILO modelled estimates. (ii) Blue bars represent countries with upper-secondary dominant VET (Level 1), while green bars represent post-secondary/short-cycle tertiary dominant VET (Level 2).

International experience indicates that effective VET systems share three core features: strong public investment, deep employer engagement, and clear pathways for skill portability.

We estimate the benefit-cost ratio (BCR), which evaluates expected earnings gains from vocational training relative to its costs across the three countries with diverse VET systems, to assess the returns from education systems which formally embed skilling.

Our analysis shows high returns from these systems. The BCR is around 6.9 in Germany, 5.1 in Singapore, and 4.2 in Canada, indicating that earnings gains are several times higher than the training costs in each case, as shown in Table 1.

‍Table 1. Benefit-cost ratios (BCRs) per person for VET programmes 

‍Sources: Eurostat (2024): Germany earnings; Statistics Canada (2023): Canada earnings; World Bank: PPP conversion factors; OECD (2023): Relative earnings (ages 25-34), employment rates, and cost data for Germany and Canada; Ministry of Manpower, Singapore (2024): Earnings; Ministry of Education, Singapore (2024): Cost data. Authors’ calculations.

Notes: (i) Calculations are on a per-person basis using the most recent available data (2020-2023), assuming labour market entry at age 25 after completing VET. (ii) Benefits are measured as expected earnings between ages 25 and 34, assuming no real annual earnings growth, and calculated as earnings × employment rate, (iii) Germany: hourly median wages (2022) are annualised (38 hours/week, 52 weeks/year) and adjusted using relative earnings indices. (iv) Canada: median annual earnings (2020) for ages 25-34 are derived using OECD relative earnings ratios. (v) Singapore: starting salaries of Polytechnic graduates (2023) are used as a proxy for earnings at age 25. (vi) Total costs are calculated as annual VET programme costs multiplied by average programme duration.

‍Policy implications for India

For India, the policy implications are clear in terms of strengthening the VET system.

First, education reforms should prioritise the early integration of VET into the general education system. While the National Education Policy (NEP), 2020 recommended such integration, progress in this direction has been slow.

Second, improve the relevance and perception of VET, especially ITIs, through state-level branding campaigns, better alignment of ITI course offerings with local labour market demand, and strengthening the quality of training, infrastructure, and instructors within ITIs.

Third, enable portability across vocational tracks by operationalising the National Credit Framework and establishing clear progression pathways between ITIs, polytechnics, and higher education institutions. This would involve assigning credits to vocational qualifications based on learning outcomes and training hours, and establishing rules for the recognition and transfer of these credits across institutions and programmes.

Fourth, strengthen public-private partnerships by actively involving industry in curriculum design, training delivery, certification, and apprenticeship programmes across the VET ecosystem.

Recent policy initiatives such as the Employment Linked Incentive (ELI) scheme, PM Internship Scheme, and ITI upgradation efforts indicate growing attention to employment, but they remain fragmented and insufficient. They focus more on hiring incentives and infrastructure rather than systemic reforms like formal training, certification, and long-term skill development pathways (Press Information Bureau, Government of India, 2024).

Overall, India’s skilling challenge is not merely about expanding access but about transforming the quality, structure, and labour market relevance of vocational education. Comprehensive reforms, aligned with global best practices, are essential to unlock the full potential of India’s workforce.

The views expressed do not necessarily reflect that of the authoRs’ organisation or the I4I Editorial Board.