PM-SETU bets ₹6,000 cr on ITI skilling. Will it deliver jobs?

With a proposed allocation of ₹6,000 crore in the Union Budget 2026–27, the Pradhan Mantri Skilling and Employability Transformation through Upgraded ITIs (PM-SETU) emerges as the largest scheme within the Ministry of Skill Development and Entrepreneurship, accounting for a substantial share of the ministry’s overall budget of around ₹9,800 crore. Launched on October 4, 2025, PM-SETU is a Centrally Sponsored Scheme aimed at upgrading India’s vocational training ecosystem.

According to the scheme guidelines, its implementation comprises two components: the upgradation of 1,000 Industrial Training Institutes (ITIs) and developing five National Skill Training Institutes (NSTIs) as premier institutions for skilling and trainer development. Together, these components have a total outlay of ₹60,000 crore over a five-year period.

What does the scheme aim to do for government vocational institutes?

As per the PM-SETU respective component guidelines, one thousand Government ITIs—comprising 200 Hub ITIs and 800 Spoke ITIs—are to be upgraded under a hub-and-spoke model, wherein Hub ITIs function as anchor institutions linked, on average, to four Spoke ITIs. All upgraded ITIs are to be equipped with “state-of-the-art” infrastructure, machinery, and equipment, with the selection of ITI clusters determined through an Investment Plan submitted by the Industry Partner, approved by the State, and finally cleared by the Central Committee. This is financed through a cost-sharing pattern of 50% by the Central Government, 33% by States, and 17% by industry, with higher central contributions (up to 83%) for North-Eastern and Hilly States and certain UTs.

The second component pertains to the capacity augmentation of five National Skill Training Institutes (NSTIs) out of 33, in Bhubaneswar, Chennai, Hyderabad, Kanpur, and Ludhiana and their transformation into National Centres of Excellence for Skilling in partnership with global institutions with focus on as premier institutions for skilling and trainer development. It further notes, these five are selected based on parameters like land area of the institute, trade diversity, existing sitting capacity, scope for expansion, availability of faculty, and other factors. This follows a cost-sharing model, with 80% funding from the Central Government and 20% from industry.

What are the concerns over the Hub-and-Spoke model?

Under the Hub-and-Spoke model, each Hub ITI is expected to be linked with at least four Spoke ITIs. The criteria for the selection of Hub and Spoke ITIs are left to the Anchor Industry Partner (AIP), to be detailed through the Strategic Investment Plan (SIP). The SIP is required to include key sections and information such as the baseline characteristics of the Hub and Spoke ITIs, proposed interventions, outcome targets, and implementation strategies to be approved by the State Steering Committee and ultimately by the National Steering Committee (NSC) as a pre-condition for funding. The scheme will be rolled out in phases, with the first phase covering approximately 20–25 Hub-and-Spoke clusters, comprising around 100–125 ITIs.

Reflecting on the selection process for hub-spoke model, Raj Gilda, Co-founder of Lend-A-Hand India, an NGO which works in vocational education, notes that cluster selection is likely to depend on the commonality of trades, institutional characteristics, and shared industry interest between the Hub and its Spoke ITIs. He points out that, given geographical and infrastructural considerations, ITIs located in or near urban centres may benefit more easily, while rural ITIs, often serving different local skill needs, may face logistical challenges or risk exclusion. How these dynamics play out in practice, he adds, will ultimately depend on how the model evolves on the ground and may be addressed in subsequent phases of implementation.

What was the performance of previous schemes?

According to a 2023 NITI Aayog report, the government incurs an annual public expenditure of around ₹10,000 crore to operate the ecosystem of around 3,500 government ITIs, in addition to ₹2,200 crore spent under the Skill Strengthening for Industrial Value Enhancement (STRIVE) scheme, which ended in 2024. Based on data available as of July 2022, it says that despite this substantial investment, placement outcomes remain extremely poor: only 405 candidates were placed out of 4,14,247 trained, translating to a placement rate of just 0.09 per cent.

At the same time, the industry continues to report a shortage of skilled technicians. The report also highlights significant poor gender diversity with women comprising only 6.6% of enrolled trainees and 15.83% of instructors. There’s also a severe shortage of faculty with only about 36% of sanctioned instructor positions filled, increasingly reliant on contractual or guest faculty. Consequently, the Indian ITI ecosystem has yet to attain the quality benchmarks associated with vocational education and training (VET) systems in Germany and other comparable countries.

Are there clearly defined targets?

As per the guidelines of both the components, the scheme does not prescribe uniform targets, but gives indicative Key Performance Indicators (KPIs). Each Hub-and-Spoke cluster or National Skill Training Institute (NSTI) is required to define its own KPIs through the Strategic Investment Plan (SIP) and Annual Operational Plan (AOP).

These KPIs cover areas such as infrastructure development, training delivery and outcomes, trainee placement, faculty capacity, and industry partnership activities. Performance is assessed using a cost-weighted scoring approach, whereby progress in each component contributes to the overall performance score in proportion to its share of the budget. Implementation is overseen at the State level by the State Steering Committee and Independent Monitoring Agency, while the National Skill Training Institutes (NSTIs) are monitored by the National Steering Committee (NSC) at the central level.

Will this address the technical skills gap and enable the growth of ITIs?

Implementation under PM-SETU faces a fundamental challenge rooted in the nature of vocational education itself. Unlike schools or higher education institutions, ITIs are expected to deliver job-ready, sector-specific skills, often through short-term courses, which demands trainers with up-to-date technical expertise, sustained industry exposure, and strong pedagogical adaptability. However, a persistent skill gap among trainers exists across both government and private sectors, notes Mr. Gilda.

The guidelines appear to rely on enhanced industry participation to address this gap, through a minimum industry co-funding requirement of 17%, greater control over board-level decision-making, and expanded responsibilities in curriculum design, recruitment, and training. It also allows for multiple staffing arrangements, including the co-existence of government ITI staff with Special Purpose Vehicle (SPV)-appointed personnel, deputation of government staff to the SPV, or ITIs being entirely managed by SPV staff recruited on their own. “However, the actual outcomes remain contingent on implementation. In operations, as much attention should be given to trainers as to tools, equipment, and infrastructure in ITIs, as well as to the technical competencies specific to vocational training,” says Mr. Gilda.

Are the intended industry partners not small-scale local industries?

The industry partners are primarily envisaged as credible Anchor Industry Partners (AIPs), whose eligibility criteria, such as turnover, scale of operations, and number of employees, are to be determined with explicit caution by States to prevent the entry of “small-time operators,” signalling a preference for large and established firms capable of making financial and operational commitments.

Mr. Gidla argued that industry should not be understood only as large corporations, noting that equating “industry” solely with big-name companies overlooks where most jobs actually exist, namely in local and small-scale industries. He emphasised that, given the scale of investment involved, small-scale industries may not be eligible or interested to participate, but ITIs through Industry Partners nonetheless require much stronger, systematic, ground-level linkages with them to remain relevant.

Is there sufficient demand or scope for existing ITI graduates to be recruited on a year-on-year basis? 

Although the Strategic Investment Plan (SIP) requires local labour-market studies, analysis of industry value chains, and consultations with experts across sectors, and allows collaboration with local industries or small enterprises to run customised programmes, the evaluation criteria for SIPs also emphasise in-house absorption and job-related performance indicators for industry partners. In this context, the question remains whether there is adequate and sustained demand for existing ITI pass-outs to be recruited each year.

Mr. Gilda opined that, the dichotomy is that students aspire primarily to work for name-brand industries, even though such firms do not generate jobs at a scale sufficient to absorb the number of ITI graduates. At the same time, local employers and small-scale industries—which collectively have significant demand—struggle to attract graduates, as students are often reluctant to take up such jobs due to the aspirational value and social recognition associated with it.

(The author is an independent journalist based in Hyderabad covering politics, human rights, and environmental issues, primarily from Andhra Pradesh and Telangana. He is now expanding his work to include education across all States.)

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