Purpose: Indian government initiated several skill development policies and different types of vocational education and training (VET). Yet the participation in skill education is low because of poor labour market outcomes. This paper aims to calculate returns to skill education to understand the type of training that will have better labour market outcomes. Design/methodology/approach: In this paper nationally representative data from the periodic labour force survey (PLFS), collected by the national sample survey office for 2017–2018, are used to estimate the returns to formal and non-formal VET obtained (after different levels of general education) with the help of Heckman's two-stage method. Findings: Nearly 8% of the working-age population has received some form of VET (mostly non-formal), generating poor returns. For the overall population, formal on-job training (OJT) and full-time VET influence wage positively and significantly. Full-time VET obtained after secondary and below levels of education generates positive returns, whereas part-time VET is profitable only to those without formal education. At the graduate level, technical education obtained along with VET is associated with better wages. Originality/value: In India where a considerable proportion of the workforce is employed in the informal sector, different types of skill training like full-time, part-time and OJT influence labour market outcomes. This finding has policy implication for countries with large informal sector and calls for further research in such countries. © 2023, Emerald Publishing Limited.
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