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

Santosh Mehrotra () and Ashutosh Sing ()
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Santosh Mehrotra: Higher School of Economics
Ashutosh Sing: Independent skills specialist with 15 yrs of research, practitioner and consultancy experience

No 18805, IZA Discussion Papers from IZA Network @ LISER

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.

Keywords: TVET; human capital; Levy–Grant system; digital public infrastructure; informal economy; lifecycle fiscal projection (search for similar items in EconPapers)
JEL-codes: H25 I25 J24 O15 O38 (search for similar items in EconPapers)
Date: 2026-07
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