The Yawning Skills Gap in India

Gyanendra Kumar Kashyap 

India, one of world’s fastest growing economies and home to one of the world’s youngest population faces a unique and paradoxical problem. While it has the numbers in terms of manpower, that manpower lacks skill and training. It is specifically this very point that the 2005 study by software lobby Nasscom and consultancy firm McKinsey & Co - just one in four engineers was employable, or could be trained for a job - jolted India out of its reverie on employability. However (late) Dr. C K Prahlad’s prediction in 2007 that a double digit growth in India will see light only if the country is able to make available 200 million graduates and 500 million skilled people by 2022, provided the much needed breather. Today the government as well as the industry shares the same view. India’s GDP growth is still expected to range between 6%-7%. The domestic industry is growing and several international companies are setting up base in India; propelled by the sheer market size. This tremendous growth has increased the demand for labor – skilled labor. Considering the demographic dividend that India enjoys, it is apparent that one would expect that this requirement of a large pool of skilled labor to be the least of all the bottlenecks. However the irony is such that a number of industries are struggling to achieve their growth targets because of shortage of skilled labor.

The awakening:

As India moves progressively towards becoming a ‘knowledge economy’ it becomes increasingly important that the country should focus on advancement of skills  and these skills have to be relevant to the emerging economic environment. The key emphasis has to be on ‘employability’. Though India churns out a large number of educated people every year, they lack the ‘skills’ to make them readily employable. They have to be trained again. Therefore, while in absolute number, there is surplus supply of manpower, in the crucial ‘skilled’ and ‘qualified’ segment, there are acute shortages. These shortages if not addressed properly can lead to a slowdown in the country’s economic growth. In order to achieve the twin targets of economic growth and inclusive development, the country requires significant progress in several areas, including infrastructure development, agricultural growth coupled with productivity improvements, financial sector growth, a healthy business environment, ably supported by a skilled workforce.

Currently, 90 percent of the jobs in India are ‘skill-based’; entailing the requirement of vocational training. This is in contradiction to the fact that only 6% of the Indian workforce receives any form of vocational training. As per industry statistics, only 25 percent of technical graduates and 10 to 15 percent of general graduates have the necessary skills for immediate employment. The education system churns out students that are not immediately employable and skill up-gradation on the job is low; implying that a large section of the currently employed labor possesses outdated skills. This has in a way created an undoubted necessity to scale up vocational education to cater to India’s demand for higher economic growth, demographic changes, and the obvious demand-supply mismatch in available skills in many sectors.

A well-intentioned initiative/ The positive vibes:

The growth prospects of the Indian economy depend to a large extent on how the country tackles certain issues of intellectual capital today. The concern largely centers on the much-debated demographic dividend, or the rising proportion of working-age people in India. Faced with the twin challenge of unemployment and job creation, the Central government’s biggest concern is not just how it can boost new opportunities for India’s burgeoning population of young people, but also how it can overcome the acute shortage of skilled labor. The good news is that the government of India has undertaken a series of initiatives almost on a war footing in the past few years. The government has set itself an ambitious target of training 500 million people by 2022 in its National Skill Development Plan (NSDP). Some of the clear and far-reaching outcomes from NSDP are to look at increasing the capacity and capability of the existing system. This was proposed to be done with multiple, wide-ranging initiatives. Key amongst these are PPP (public private partnerships) to complement private investment in this space, the setting up of a National Vocational Qualifications Framework (NVQF) and establishment of National Skill Development Corporation (NSDC) to foster skill training in the identified sectors.

To this end the National Skill Development Corporation (NSDC) has been entrusted with skilling 150 million people, the ministry of labor and employment (MoLE) has a target of 100 million, the ministry of human resource development (MHRD) 50 million and the rest of the 200 million among 17 other ministries.

The industry’s participation:

To a large extent the industry is the victim as well as the culprit when it comes to the scarcity of skilled workforce. However there is a palpable trend in India Inc., starting to train its people on a scale large enough to alter the nation's future. Dozens of training companies with ambitions of training millions in engineering, construction, manufacturing, retailing, insurance, banking services including microfinance, accountancy, hospitality, health care and other vocations are sprouting up around India. For example, education company Core Education and Technologies Ltd.,  plans to invest at least Rs.225 crore to open a chain of vocational education institutes across India to train some three million people over the next five years. Further there are seasoned players like Centum that bring to the table both backward and forward linkages. They work with companies to understand their skill set requirements over a period of time and then work backwards and decide what courses should they launch and where should they open new training centres.

Not only this, there are a number of private firms across industry verticals that are adopting ITIs. For instance, Maruti Suzuki India Ltd.,  is adopting 40 state-run technical schools to create a customized labor pool it will need to fuel its Rs. 18,000 crore expansion in Gujarat. The ITIs, mostly in northern India, will not only ensure a steady supply of trained personnel to the auto maker, but also to its dealers and vendors such as Sona Koyo, Amtek Auto Ltd and Rico Auto Industries Ltd. In fact the ITIs adopted by various companies such as the Taj Group, Hindustan Unilever Ltd, Videocon Industries Ltd, India Cements Ltd and Punj Lloyd Ltd have shown to have better placement record. This is primarily because in such cases ITIs get better infrastructure, contemporary curricula in sync with the industry demand which consequently also improves their placement record. As facts would have it, the adoption of government ITIs is a win-win situation as it helps the cause of modernization, and from the company perspective, it helps them to get a customized workforce.

The government’s well intentioned initiatives as well as India Inc's newfound push on skilling could help it follow the footsteps of its South Korean or even German peers where an intense vocational focus in education and training helped the countries rapidly expand their economies. If the dozens of training institutes mushrooming in India can deliver it a skills edge, the country could reap benefits of its demographic dividend. On the contrary, if it fails, India better get ready to deal with a demographic debt or in a worst case scenario a demographic disaster. But at this juncture failure just cannot be an option for India. 

The academia – industry alignment:

Education, broadly speaking, equips or should equip an individual for the world in which s/he has to operate and successfully so. In the light of this, education as it is falls short of empowering the youth for the competitive market scenario. As studies suggest, only a part of graduates are employable out of the enormous volume of the output of educated youths. If education has to strengthen its role and remain relevant to the world, it will have to render skills development an integral part of its endeavor. The challenge of skilling / up skilling 500 million by 2022 will require both fundamental education reform across primary, secondary and higher education and significant enhancement of supplementary skill development.

In India, approximately 12.8 million people join the job market every year. The current skill capacity of the country is about five million - a deficit of more than seven million annually. To add to the woes is the quality of training, which has limited industry linkages and fails to meet the industry standards. As the gap between skills, employment needs and the quality of the output continues to widen, there is a need for drastically different strategy to bridge this gap and a need for the intervention of the government, academia and industry. Thus, the curriculum for training and skill development, which is critical for providing decent employment opportunities, has to be evolved in consultation with and active involvement of the industries which require the manpower. An industry-academia team must be in place which understands the industry needs and thereby factors this in the teaching and curriculum.

Change of hearts / the mind shift:

There is an obvious and widening disconnect between education imparted to the youth and the market requirement and demand. While education imparts one kind of training to them, industry and markets are looking for another kind of skills set in the job seekers. As a result of this - the degree holders are seeking jobs while there is manpower crunch and degree holders are being denied the jobs. This paradoxical situation is in a way reflective of the obsession with degrees and the white-collared jobs that they potentially secure. The importance and hence the acceptance of vocational education has been clearly undermined.  As a matter of fact formal education system in India still remains divorced from any sort of vocational education or training.

Skills development is going to be the defining element in India’s growth story. There is a need to re-define the relationship of education, employment and skills development. Often vocational education is even dismissed as good education. People perceive vocational education as something which one pursues when one cannot get into a mainstream course. It is believed that a vocational course takes one to a shop floor while a graduation will leads to a good office. All this has to change and people’s perception needs to undergo a change.

The change in perception is all the more important as the prevailing higher education system in India is not churning out skilled individuals and thereby affecting the employability quotient. There is also a dearth of quality institutions as compared to the number of students coming out of secondary schools and joining higher education. Thus, in such a scenario, vocational education can prove to be a lucrative option for students as it will skill them and provide them with jobs.

This can be brought about only when there is proper recognition for the various courses and acceptance of the same by the industry. Further vertical mobility options for students opting for vocational education at the UG and PG level is also essential failing which students may not prefer it at the school level.

The way forward:

In the present context of continuing demographic dividend the unique problem facing the country is that of labor surplus and skills scarcity. The International Monetary Fund’s April 2012 Regional Economic Outlook: Asia and Pacific, “Managing Spillovers and Advancing Economic Rebalancing”  categorically states that India’s continuing demographic dividend can add about 2 percent to the annual rate of economic growth, if harnessed properly. Hence, if India is to maintain its growth and prevent the economy from derailing the ‘skill gap’ issue has to be addressed immediately.

The government is keen on encashing this demographic dividend. The Budget for 2012-13 has doubled allocation under the National Skill Development Fund (NSDF) to Rs 1,000 crore, raising the corpus of the fund to Rs 2,500 crore. Besides this the launch of credit guarantee fund and exempting vocational training institutions from service tax will make skills training affordable. While the 500-million target is stiff, experts in the field believe that it is achievable.