Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint

Industry must lead the way in skilling India

Govt initiatives such as Skill India can only be a part of the solution

The chasm between India’s demographic bulge and the employment opportunities required to absorb it has been a staple in any debate about economic growth, and rightly so. The destabilizing political and social effects of a large unemployed population and the productivity loss from under- or poorly manned industries are anathema to any developing nation. Increasing levels of technology integration in production and business processes complicate the picture further. The National Democratic Alliance government has focused on a core aspect of the employment issue with the Skill India drive. But it will need to navigate an increasingly complicated landscape.

Recent data from the Organisation for Economic Co-operation and Development puts the skills shortage in India—measured as a percentage of firms with ten or more employees that have difficulty finding qualified employees—at 61%, among the highest ratios. This is not surprising. The Labour Bureau Report 2014 had pegged the skilled workforce in India at a dismal 2%. To its credit, the United Progressive Alliance administration had attempted a structured approach to the problem with the National Skill Development Corporation (NSDC)—a public-private partnership aimed at funding for-profit vocational training initiatives, now part of the Narendra Modi government’s skilling initiative.

But the NSDC’s performance to date has left much to be desired. It has a laundry list of problems: the need to coordinate with multiple ministries all running their own programmes creating bureaucratic sclerosis, funding tussles, issues of perception with job-seekers looking down on vocational training and job-creators unwilling to fork out a premium for skilled workers and poor hit rate as far as post-skilling employment goes. Unsurprisingly, the NSDC managed to train just 3.3 million people in 2014 and aimed for 6 million last year, when the 2022 target is 150 million.

The Modi government has built on its predecessor’s efforts with the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), the ministry of skill development and entrepreneurship’s flagship scheme, implemented by the NSDC. The momentum it is giving to the issue is commendable. But it should keep this in mind: skilling and upskilling efforts must be industry-led. The PMKVY’s various provisions and the triple-layer decision-making structure at the coordinating National Skill Development Mission pose the risk of a top-down approach that cannot anticipate or respond to shifts in demand and global conditions as effectively as the market can.

This is especially true in the context of employability-enhancing skills at a time when technology is rapidly changing their nature. A World Economic Forum report posits that up to a third of the skills considered important today will have changed as soon as 2020. Greater automation and machine intelligence integration is likely to hit the manufacturing sector—the great hope for boosting employment—hard over the next decade or two.

This is not to suggest that the government step back entirely. But it would do well to think outside the box. For instance, voucher programmes that give individuals the freedom to join training programmes of their choice—with the latter receiving government funding by redeeming the vouchers—improve outcomes via market mechanisms and have been found to work in countries as diverse as Austria and Kenya. The government must also create an economic environment that incentivizes industry players to step up. Labour reforms are key here. Paying a premium for workers from as yet fledgling skilling programmes is a risk when a deep pool of cheaper, unskilled labour is available. If employers are to take the risk—their unwillingness to do is currently a key problem—they must have the freedom to make appropriate adjustments in order to minimize and, if necessary, walk back the risk.

It’s also worth remembering that skilling programmes are the end point of employability creation, not the beginning. The education system is the primary incubator—and in India, it is sadly lacking. By some estimates, barely 40% of Indian graduates are employable. This is predictable when education models have few options or weightage given to skills and knowledge relevant in today’s market; nor is there sufficient interaction and integration between educational institutions and industry to facilitate internships, mentoring initiatives and feedback loops.

Skilling India is a mammoth task. The coming years will see substantial productivity increases, but also significant worker dislocation. Central government initiatives make for good messaging—but they are only one part of the solution.

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