Cities With High-Quality Colleges Are Not the Ones Creating the Jobs

By Anukriti Yadav
Published Aug 24, 2026

India’s higher education system has expanded faster than its labour market has been able to absorb it, and the geography of that mismatch is now visible at the city level. The share of graduates among India’s unemployed 20–29 age group rose from 46 percent in 2017 to 67 percent in 2023.0020These are not marginal statistics. They describe a structural failure in how the country converts educational output into economic opportunity, and city planning has been largely absent from the conversation about fixing it.

The Technical Institute Case Study

The clearest illustration is not a coaching hub but the institutions coaching hubs feed into. Unlike Kota, which trains students to clear an exam rather than to work, India’s premier technical institutes are genuine higher education institutions that actually skill their students, and a large share of the oldest and most selective ones sit in towns rather than metros. This is not only an IIT pattern: it holds across IIT campuses at Kharagpur, Roorkee, and Guwahati; NITs at Warangal, Tiruchirappalli, Surathkal, and Rourkela; IIITs at Allahabad and Gwalior; and BITS Pilani, or even MBA institutions all of which built their reputations while located outside India’s major job markets.

Placement seasons at these campuses draw in hundreds of recruiters and produce some of the highest salary packages in the country, with average offers at the older IITs running well above twenty lakh a year and NIT and IIIT placements not far behind. But the recruiters are headquartered in Bengaluru, Hyderabad, Gurugram, Mumbai, and Pune, not in the host town, and the offer itself is a ticket out. Graduates across this entire tier of technical institutions are placed on campus and relocate within weeks of convocation, taking the degree, the skill, and the institute’s accumulated brand value with them.

The town supplies land, water, power, and civic services to run a campus whose principal export is trained people, and captures almost none of the economic activity that training eventually generates.

A National Pattern, Not a Local Anomaly

This is not only a problem confined to a handful of elite campuses. It reflects a national pattern that the data confirms from multiple directions. The Periodic Labour Force Survey’s 2024–25 round puts overall youth unemployment (ages 15–29) in double digits, categorically higher than the 3.1–3.2 percent unemployment rate for the working-age population as a whole with urban female youth unemployment above 20 percent.

The Centre for Public Policy Research, drawing on PLFS 2023 and industry employability assessments, notes that only around 42.6 percent of Indian graduates are considered employable at all, and that just one in five engineering graduates meets the skill bar for IT or manufacturing roles. The geography of educational excellence and the geography of economic opportunity are demonstrably decoupling, and the data shows it happening in real time, not just anecdotally.

Why Urban Planning Has Failed to Address This

This decoupling persists because Indian city planning treats higher education institutions as a land-use category rather than as an economic development input. Master Plans and Development Plans zone campuses, protect their boundaries, and count them as civic assets, but no statutory instrument requires a corresponding commitment to the industrial parks, incubators, or service-sector infrastructure that would let a city’s own graduates build careers where they studied. Planning bodies track enrolment, built-up area, and institutional accreditation. Almost none track graduate retention or local employment absorption as a planning outcome.

The result is a familiar transfer: states bear the fiscal cost of producing skilled graduates, and metro economies Bengaluru, Gurugram, Pune, Hyderabad capture the return, while the originating city retains neither the talent nor the tax base that talent would have generated.

Three Policy Shifts That Could Close the Gap

Closing this gap requires three specific, measurable shifts in policy rather than another round of skilling rhetoric. First, industrial and IT investment incentives should be spatially weighted toward cities with demonstrated graduate outflow, using AISHE and PLFS district-level data to identify where talent is being produced but not retained rather than allocating investment purely on generic ease-of-doing-business rankings.

Second, state Town and Country Planning departments should be required to report graduate employment absorption alongside enrolment figures in city development plan reviews, making retention a tracked planning indicator rather than an economic externality.

Third, urban infrastructure investment in education-hub cities needs to be sequenced for residents and graduates, not only for the transient student population the housing, connectivity, and industrial-park gaps that towns such as Kharagpur, Warangal, and Surathkal have long faced are the same gaps that make it impossible for these cities to hold on to the talent their own technical institutes train.

Conclusion

India does not have a shortage of good colleges. It has a shortage of cities capable of employing the people who graduate from them. Fixing that is a planning problem before it is a skilling problem, and it needs to be treated as one.

FAQs

1. Is this only a problem for elite institutions like the IITs, or does it apply to other technical institutes and higher education more broadly?

It applies broadly. Any city with a concentration of higher education institutions faces the same planning gap if it does not simultaneously build the industrial, service-sector, and civic infrastructure needed to retain graduates. The IITs, NITs, IIITs, and institutes such as BITS Pilani or institutions teaching MBA Programs are the sharpest examples precisely because these institutions are doing their job well, producing genuinely skilled graduates, yet the same retention gap shows up, in varying degrees, across this entire tier of technical education and in many other tier-two education-hub cities across India.

2. What would it take for a city’s Master Plan to actually track graduate retention?

It would require Town and Country Planning departments to treat retention as a reportable planning indicator, similar to how they currently report enrolment or built-up area, using existing datasets such as AISHE and PLFS at the district level. This is primarily a reporting and accountability change rather than a data-availability problem, since much of the underlying data already exists but is not incorporated into planning review cycles.

3. Are there Indian cities that are getting this right?

Very few cities currently link educational planning to graduate employment outcomes in a formal, tracked way, which is itself part of the argument of this piece. Where retention has improved, it has generally followed broader economic development, such as IT and services growth in cities like Pune and Hyderabad, rather than a deliberate planning intervention aimed at keeping local graduates in place.

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References:

State of Working India 2026 – Centre for Sustainable Employment, Azim Premji University

Periodic Labour Force Survey (PLFS), 2024–25, Ministry of Statistics and Programme Implementation (MoSPI), Government of India.

World Bank, “India’s Urban Infrastructure Needs to Cross $840 Billion Over Next 15 Years,” Press Release, November 14, 2022.

Choudhury, P., Ganguli, I., and Gaulé, P., “Top Talent, Elite Colleges, and Migration: Evidence from the Indian Institutes of Technology,” NBER Working Paper No. 31308, National Bureau of Economic Research, 2023.

All India Survey on Higher Education (AISHE), Ministry of Education, Government of India.