Friday, Oct 31, 2014

The challenge is skilling

Targets and budgets are only part of the solution. What is more interesting are the innovative design and delivery models being set up to respond to job-market realities. Targets and budgets are only part of the solution. What is more interesting are the innovative design and delivery models being set up to respond to job-market realities.
Written by S Ramadorai , Varad Pande | Posted: March 25, 2014 12:10 am | Updated: March 25, 2014 8:28 am

No government can ignore the task of making young India job ready.

Heard of “Velu the Welder”? This simple “welding simulator” is transforming the welding landscape in India, which today faces a scarcity of two lakh skilled welders. By training at 30 per cent less cost and in a considerably safer way, it is preparing thousands of youths to take up lucrative welding jobs that pay anywhere between Rs 15,000 to Rs 1 lakh a month. “Velu the Welder” is a small part of a skilling transformation that India is undergoing today.

India’s working-age population will rise by 12.5 crore over the coming decade, and by a further 10.3 crore over the following decade. It is almost a cliché to say India is sitting on a demographic dividend. That is, with its growing young workforce, it can look forward to decades of high productivity, economic growth and upward social mobility. What is often ignored is that this tale assumes two things — first, there will be availability of productive jobs and second, there will be skilled workers to take on the jobs being created. While the first is often talked about, the second, skilling and re-skilling “young India” to become “job ready”, is equally important, and often treated as secondary. Survey after survey shows that the lack of a job-ready workforce is one of the biggest constraints facing Indian industry. By 2022, it is estimated that unless action is taken, there will be a gap of 10.3 crore skilled labourers in the infrastructure sector, 3.5 crore in auto and 1.3 crore in healthcare, to name a few.

Skilling is an appropriate area for government intervention as it is an example of what economists call a “market failure” — employers on their own will not invest enough on skilling employees (what stops employees from being poached once they are trained at the company’s expense?), and employees have limited ability and willingness to pay for skilling. They are often unaware of the full “return on investment” and are also often credit-constrained, with little recourse to collateral free credit. Left to its own, the market would therefore create far fewer job-ready workers than the economy needs.

Faced with this reality, the government has given a major impetus to skilling over the last few years. To begin with, a clear national goal has been established — to skill and re-skill 500 million Indians by 2022. A National Skills Development Agency has been set up to coordinate various piecemeal training efforts of different ministries, state governments and industry. The budget for skilling has been ramped up several-fold to more than Rs 10,000 crore continued…

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