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From Skill Acquisition to Workforce Intelligence: An Institutional Financing Architecture for India's Skill Economy

Author

Listed:
  • Mehrotra, Santosh

    (Higher School of Economics)

  • sing, Ashutosh

    (Independent skills specialist with 15 yrs of research, practitioner and consultancy experience)

Abstract

Traditional Technical and Vocational Education and Training (TVET) systems are often misaligned with labour-market needs because they rely on supply-side financing and fragmented labour-market information. This paper addresses these institutional failures by reconstructing the first comprehensive estimate of India's aggregate TVET expenditure, triangulating fragmented data sources to estimate annual spending at US$6.7–9.4 billion. We propose a dual-pillar institutional architecture, integrated with India's Digital Public Infrastructure, comprising the Integrated Labour Contribution Base (ILCB), which links formal, payroll and informal-worker records into a unified labour-market information system, and the Reimbursable Industry Contribution (RIC), a mandatory 2% payroll-linked levy–grant mechanism for formal-sector firms. Macro-fiscal modelling shows that an annual allocation of US$2.2 billion can sustainably co-finance enterprise and apprenticeship training while expanding Recognition of Prior Learning, skill loans and training vouchers. By reducing information failures and employer free-riding, the proposed framework offers a scalable institutional model for financing skills development across India and the Global South.

Suggested Citation

  • Mehrotra, Santosh & sing, Ashutosh, 2026. "From Skill Acquisition to Workforce Intelligence: An Institutional Financing Architecture for India's Skill Economy," IZA Discussion Papers 18805, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18805
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    References listed on IDEAS

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    1. Johanson, Richard, 2009. "A review of national training funds," The Social Policy and Labor Discussion Paper Series 52187, The World Bank.
    2. Gary S. Becker, 1964. "Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, First Edition," NBER Books, National Bureau of Economic Research, Inc, number beck-5.
    3. Acemoglu, Daron & Pischke, Jorn-Steffen, 1999. "Beyond Becker: Training in Imperfect Labour Markets," Economic Journal, Royal Economic Society, vol. 109(453), pages 112-142, February.
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    Keywords

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    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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