Skill Development in India: Big Promises, Tall Failures


Atul K Thakur | February 17, 2014

The globalised world demands skilled manpower to convert growth opportunities into jobs and stable incomes. With millions of new job-seekers entering the job market every year, skill development has become one of India’s urgent priorities.

The 12th Five Year Plan (FYP) has highlighted skill-building as an imperative need to reap India’s so-called demographic dividend. Indian universities and professional institutions churn out hordes of degree and diploma holders, most of them are unemployable because they lack the skills manufacturing and services industries look for.

The bulk of employment is still being created through agriculture, which is subject to seasonal fluctuations. Even skill-based manufacturing sector is sensitive to these seasonal changes as the processing of agricultural products majorly determines its overall production cycle.

It’s true that India has comparative advantage in terms of having a younger workforce than China and all OECD countries, but the drive to scale-up high on these is missing. The world will witness unprecedented shortage of skilled workforce in coming years, but it’s unlikely that with the existing policy framework on skill development, India will be able to tap this chance.

The 11th FYP’s recommendations on the matter led to a three-tier structure: the PM’s National Council, National Skill Development Coordination Board (NSDCB) and the National Skill Development Corporation (NSDC).

The NSDCB has spelt out policy advice, and direction in the form of “core principles” and has given a vision to create 500 million skilled people by 2022 through skill systems (which must have high degree of inclusiveness); it has taken upon itself the task of coordinating the skill development efforts of a large number of central ministries/departments and states.

The NSDC has geared itself for preparing comprehensive action plans and activities which would promote public private partnership (PPP) models of financing skill development. In policy outlook, these changes have made the issue of skill development a vital agenda for the governments. The state governments have clearly given more space to channelize the skill development initiatives and reap its benefits as well.

But the challenges on skill development in the 12th FYP are numerous and those are blocking the developmental spirit: the government’s monopoly over the skill training is foremost of them. Therefore, a greater emphasis on PPP model could have best way forward in achieving the real goal of skill development. Through proactive regulation or leverages, individual employers and various industry associations should be given more space for meeting the mammoth challenges of skill creation.

Besides, the need is for better institutional mechanism to carry out impact evaluation and surveys of actual job aspirants. Even today, only about 8 percent of the total workforce in India is employed in the organized sector. The rest are employed in the informal sector, without social safety nets.

Obviously, the quality of employment is better in organized sector but it has limited capacity to absorb a large number of workforces. So the role of services either in organised tertiary sector or through self-employment is important. In given circumstance, it’s essential to promote a balance between labour and capital intensive sectors. Agriculture, tourism and SMEs would be the areas, where suitable action will bring better results.

The amendments to Industrial Disputes Act, 1947, and Contract Labour (Regulation and Abolition) Act, 1970, and workable social security schemes for both organized (like Rajiv Gandhi Shramik Kalyan Yojna-under ESIC, EPFO etc) and unorganized (like Rashtriya Swasthya Bima Yojna etc) could make livelihood attainable for all citizens.

So far, the flagship government programmes for sustainable livelihoods (such as Mahatma Gandhi National Rural Employment Guarantee Scheme, Swarnajayanti Gram Swarozgar Yojna and  Swarna Jayanti Shahri Rozgar Yojna ) have not only failed to alleviate the poverty but these all have made corruption firmly established at the lower tier of bureaucracy and on the panchayat level.

Ministries such as Labour& Employment, Human Resource Development, Rural Development and the Urban Development& Poverty Alleviation have launched their skill upgrading programmes, but they are not producing desired results.

Creation of National Skill Development Mission in PPP mode was a good move, but its performance is far from satisfactory. The chances of the NSDC setting up 1,500 new ITIs and 5,000 skill development centers in targeted time are bleak, too.

The Modular Employable Skills (MES) and Skills Development Initiative Scheme (SDIS) adopted by the Ministry of Labour and Employment provide the framework for skill development for school leavers and workers, especially in the unorganised sectors, but again, the results are sub-optimal.
The reason why well-meaning government plans on skill development come to grief is that the existing strategic and implementation models of skills development don’t correspond well with the competitive global requirements of skilling. Of course, India’s IT sector is a beacon of hope but lack of skill development explains why manufacturing has not taken off as a major growth component of India’s economy.

Today, the slow employment generation and its inflationary impact haunt badly. The Phillips Curve reveals it: “lower the employment, higher the rate of inflation”.

A report of Boston Consulting Group and the Confederation of Indian Industries (CII) tells that India’s workforce in 2006-07 numbered 484 million: out of this, 273 million were working in rural areas, primarily in agriculture, while 61million were working in manufacturing and about 150 million in services.

The study exposes that 40 percent of the current workforce is illiterate and another 40 percent is represented from school dropouts. Those who have completed formal schooling comprise 10 per cent, meaning that only 10 percent of the overall workforce could be counted as trained.

On the technical front, NASSCOM says that of the 400,000-odd engineering graduates who pass out every year, only 20 percent would meet the industry requirements. The rest would have to go through rigorous training before businesses could find them useful.

However Rita Soni, CEO, NASSCOM Foundation, sees the context in diverse shades: "The role that technology has played in empowering the most marginalized sections in India, be it people from remote areas or persons with disabilities, cannot be completely overlooked. While there are no true silver bullets that the industry can list down as it continues to face challenges, it is encouraging to know that it is already treading the path of inclusive development."

According to the Economic Survey 2011-12, 63.5 million new entrants would be added to the working age group during the period 2011–16. Consultancy majors IMaCS and Aeon Hewitt have added a caveat in this respect: “An incremental shortfall of nearly 350 million people will be surfaced by 2022 in 20 high-growth sectors of the Indian economy, including the infrastructure sector and the unorganized segment.”

Lack of universal access to institutional credit and other financial services is a critical factor that hobbles entrepreneurship in India. The suppressed entrepreneurial impulse adversely impacts skill development.

The problem inherently rests with the financing model of Indian banks, which lays unrealistic emphasis on collaterals or guarantees--the victims of such credit policies are mostly belong to the lower strata. The RBI has to act swiftly on this. But the structural and financial initiatives for the skill enhancement and livelihood would not come into effect until the industry will follow a clearer definition on the employability.

The primary concern of the lending should be to target the prepared individual, who is capable to run a business and nurture entrepreneurship. Though SMEs comes under the priority sector lending tag, it has not obviously helped in big deal by formal lending agencies to assist weaker sections pick their way out of poverty and the aspiring entrepreneurs liberate their animal spirits.

Micro Small and Medium Enterprises Development Act, 2006 became operational with effect from October 2, 2006. The Act replaces the concept of “industry” with “enterprises”. This Act notionally facilitates the promotion, development and enhances the competitiveness of Micro, Small and Medium Enterprises and for matters connected therewith or incidental thereto.

But the ground reality is stark, as MSMEs have no proper advocacy/industry association (barring few obscure and ineffective organisations, like CIMSME /SME Chamber of India) to look after on their interests. The leading industrial chambers-FICCI, CII or others are mostly run for pursuing the interests of big corporations and their attention on MSMEs comes only for keeping ‘high moral ground’.

National Small Industries Corporation (NSIC) has been working since 1955, and over the decades it has proved itself a big elephant of government. With its over-sized secretarial set-up, but shabbily planned programme structures, NSIC mimics the entrepreneurial aspiration of Indian youths. Its website too appears short on informations and high in offering ‘self help tips’ – it drops the dream liner with no tenability-how to become successful entrepreneur?
FICCI Survey on Labour / Skill Shortage for Industry sings a different escapist tune: “Despite having a favorable demographic profile, labor and skill shortage continues to be one of the key concerns for the Indian industry. This problem has been compounded by the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). It seems that MGNREGA has made a perceptible difference to the ‘choice of work’ of the casual labor in rural and semi urban areas.”

Though another study done in 2010 by FICCI -IMACS comes with clearer insight: “There is a need for an independent system to assess quality, comprising all elements of the skill development value chain, right from need assessment and student mobilisation up to training and placement. Current systems are primarily oriented towards quality checks (through trade tests) during the phase of assessment and certification.”

CII has launched its own Skills Development Initiative, which shares the goal of the National Skills Development Agenda to skill 500 million people by 2022. In this endeavour, CII, has set up its first skills centre at Chhindwara, MP, to train people in bar bending, grinding, pipe fitting, welding, etc. (although its functional dividends have yet to be visible, which stands opposite of CII’s hyper exuberance).

CII, along with HPCL, have also launched the ‘Swavalamban’ project to train 2,200 youth in multiple trades. The programmes have local concentration, relevance and in-built flexibility. So far, CII has released five sectoral studies on skills requirements in the constructions, auto, retail, healthcare and banking & financial services sectors. CII has also taken skills development initiatives beyond national boundaries (in Afghanistan, South Africa among the others). For the sake of record, these appear impressive, but still they are not changing the course for desirable outcomes.

T N Thakur, ex-CMD, PTC India and former Deputy Secretary, Ministry of Personnel (GOI), looked after training policy, plan and non-plan training programmes-he also spearheaded the major reforms in UPSC in Rajiv Gandhi government, he shares his views:

"India has very large young population, 70 percent of India's 1.2 billion populations is below 30 years of age. Such young population is a great strength if they are gainfully employed, otherwise they will turn to be a great liability. It's, therefore, imperative for India to have massive skill development programme and create employment opportunities through growth oriented schemes. We cannot distribute wealth if we don't have it. Only a balanced growth alone will bring prosperity and equity."

National Skill Development Corporation (NSDC) CEO & MD, Dilip Chenoy, puts his perspectives on this with incorrigible optimism:

“For a country keen to make its way in to the league of advanced nations within the next decade by leveraging its favourable demographic profile, skill development offers the best solution to realize this aspiration. In consonance with this philosophy, the National Skill Development Corporation (NSDC) through its private sector training partners has been steadfastly engaged in empowering Indian youth by equipping them with the skill sets that would allow them to participate in and contribute to the process of inclusive growth and development.”

He adds: “Till March31, 2013, NSDC Partners-which range from marquee names of corporate India such as NIIT, Future Group, IL&FS, TVS, Aptech, Apollo Hospitals etc to NGOs such as Pratham, and from start-ups such as Empower Pragati and Talent Sprint to educational institutions such as the Centurion Group of Institutions in Orissa-had skilled nearly 6lakh people nationwide. By establishing a presence in 333 districts in 25 states and 2 Union Territories through2, 598 physical and mobile facilities, NSDC Partners have been imparting outcome-linked job-oriented training in a wide array of sectors.”

Many of the NSDC’s Partners such as IL&FS Skills Development (a Special Purpose Vehicle formed between NSDC and IL&FS), NIIT Yuva Jyoti (the NSDC Special Purpose Vehicle with NIIT) or Future Sharp Skills (the NSDC Special Purpose Vehicle with Future Group), for example, have embarked on large-scale training projects capable of training over a hundred thousand or more persons in 10 years either on their own or through consortiums. These could not be said practical, as the big corporations involved with NSDC hardly needs any outside support for their skill needs.

In any case, if NSDC will start thinking for the Infosys or other big corporations’ skill requirements--the rational of its existence would be naturally questioned. A specialized body like NSDC is meant to cater the skill requirements of mass people and small enterprises, which simply cannot afford the professional skill feeding from the open source on commercial rate. A big industry entity should neither seek NSDC’s services and nor NSDC should offer them-MSMEs, must be the vantage point for NSDC.

Presently, its initiatives like: Gram Tarang (Special Purpose Vehicle formed by Orissa-based education major Centurion Group of Institutions), operates in the Naxal (ultra-left wing extremist) belt of Orissa and Andhra Pradesh, and Udaan that empowering graduates and postgraduates of Jammu&Kashmir to join the mainstream and find gainful employment opportunities, hold better promises than high shot collaborations with undeserving big companies.    

Dr S Ramadorai, Adviser to the Prime Minister in the National Council on Skill Development, Govt. of India in his interview given to The Times of India, on March12, 2013, pressed for a new rational rapproach from industry on skill creation: “the Industry needs to play a major role in the skilling initiative. With a highly demand-driven labour market, apprenticeship with industries is an important way forward. Currently, such ‘earn while you learn' models have been highly under-leveraged. More wages should be paid to highly skilled people, else training is disincentivised.”

To conclude, today the definition of skill development is fast changing. Under the industrial requirements, skills are supposed to be in consistent updation; so, there is a need for re-ordering the priorities and shifting from the one-dimensional model, which has wrongly viewed economic progresses only by statistical growth. Industry and governments must think seriously, why their well carved out plans are not working?

The failures to live on the promises are pathetic and unsustainable; at any cost, the outlays on the skill development initiatives and their outcomes have to be proximate. Unless this is realised, the exuberance on principled structures would not be meaningful. In simpler terms, the poor and the underprivileged have to be protected and involved under the new growth agenda. For that, the livelihood programmes have to be better democratized.




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