India’s labour market is showing steady demand but a widening gap between the skills employers need and those jobseekers possess is limiting hiring, according to a new report by Indeed.
The company’s latest Hiring Tracker shows that while 77 per cent of employees in India are actively or somewhat actively searching for new roles, only about one-third believe they will successfully secure one. At the same time, 50 per cent of employers say a mismatch between required and available skills is the biggest barrier to recruitment.
Hiring volumes have remained broadly stable. Nearly half of employers reported no change in hiring in the third quarter of FY25–26 compared with the previous quarter, while around one-third said they increased recruitment.
Data from Indeed Hiring Lab, the platform’s labour market research arm, shows job postings rose 3.3 per cent in January 2026 and remain 84 per cent above pre-pandemic levels. Over the past three months, postings increased across 90 per cent of occupations, signalling broad-based demand even as companies remain cautious about expansion.
“Job posting activity in India remains well above pre-pandemic levels and continues to broaden across occupations. The rise in AI-related postings shows how quickly these capabilities are being embedded across industries. Adoption is becoming more widespread, with 55 per cent of occupational categories now referencing AI, up from 36 per cent a year ago, reflecting steady hiring alongside structural change,” said Callam Pickering, senior economist for Asia-Pacific at Indeed.
The report suggests that organisations are prioritising critical roles rather than expanding headcount widely. Hiring decisions are increasingly tied to business conditions, with companies focusing on clearly defined positions rather than broad workforce growth.
Sales and business development roles lead hiring demand, cited by 42 per cent of employers. Engineering roles follow at 35 per cent, manufacturing at 32 per cent and supply chain positions at 30 per cent. These areas are viewed as essential for revenue generation and operational continuity.
Artificial intelligence is also shaping hiring trends. In January, 14 per cent of Indian job postings referenced AI-related skills, up from 12.8 per cent three months earlier. Demand is strongest in data and analytics roles, where 40 per cent of postings mention AI, and software development, at 29 per cent.
AI-related demand is spreading beyond technology roles. Industrial engineering saw 22 per cent of postings referencing AI, while scientific research and insurance each recorded 20 per cent. Even operations, logistics and management roles are increasingly incorporating AI capabilities, with mentions rising to 12.8 per cent of postings in January from 9.7 per cent a year earlier.
Despite the demand for workers, employers report challenges in finding suitable candidates. The report found that 58 per cent of employers face low applicant volumes, while half identify skills mismatch as the main hiring constraint.
The gap appears most pronounced in foundational capabilities. About 44 per cent of employers say they struggle to find candidates with strong problem-solving skills, while 38 per cent report difficulty hiring people with effective communication abilities.
These findings suggest that the challenge lies less in the availability of talent and more in practical work readiness.
In response, 53 per cent of employers have introduced formal skills-based hiring processes. These include structured shortlisting methods, certification-based evaluations and practical assessments such as live assignments.
The shift indicates that companies are increasingly evaluating candidates based on demonstrated ability rather than academic credentials alone.
For job seekers, career progression remains a key motivator. The report found that 69 per cent prioritise career growth and leadership opportunities, followed by upskilling and higher pay.
However, job stability continues to play a decisive role. More than half of respondents, or 54 per cent, ranked stability as the most valued benefit when considering employment options.
Jobseekers are also widening their search beyond traditional metropolitan hubs. More candidates are exploring opportunities in mid-sized companies and non-metro cities, influenced by lower living costs and improved quality of life.
Full-time roles remain the preferred format for most workers, with 60 per cent of respondents expecting monthly salaries in the Rs 40,000–80,000 range.
“Hiring volumes are stable, but evaluation standards are rising. In this environment, alignment between practical skills and business needs becomes the deciding factor,” said Sashi Kumar, managing director of Indeed India.
Overall, the report suggests India’s labour market remains steady but increasingly selective, with skills alignment emerging as the critical factor shaping hiring as FY26 progresses.
Source – https://www.businessworld.in/article/how-skills-mismatch-is-holding-back-india-s-job-market-recovery-597312