The challenge is skilling

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 a year. Skilling and placement targets have been set at aggregate and sectoral levels and a robust national tracking system is in place.

But 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.

First, industry has been centrally engaged in designing the training curriculum and certification of trainees, so that trainees are taught the things they need for getting a job (a major weakness of previous government training efforts was a weak linkage to job-market needs). Twenty-eight sector skill councils, with industry in the lead, have been set up for this.

Second, incentives for youth to get trained and certified are being put in place. The Standard Training Assessment and Reward (STAR) Scheme has been launched, under which each trainee gets approximately Rs 10,000 upon completion and certification of training. More than 2,30,000 young people have been enrolled under the STAR incentive programme already.

Third, technology is beginning to be deployed to transform the training landscape. Various innovative models have emerged. As the example of “Velu the Welder” (and similar simulators, such as for driving) has shown, technology is being leveraged to make training safer, more cost-effective and more scalable. With highspeed broadband connectivity to every panchayat likely to become a reality in the next two years, technology-based skilling models will only become more valuable in scale and impact.

Fourth, existing government programmes are being adapted to make the youth job-ready. The National Service Scheme has been adapted to prepare youth for entrepreneurship opportunities by enhancing their IT literacy, financial literacy, English communication and other soft skills. This is already being implemented across 40 colleges. Industrial Training Institutes (ITIs) are being upgraded, many through public-private partnerships. For example, a world-class skilling centre has been established by the Delhi government in partnership with the Singapore government, adapting from the successful training models of Singapore, to train 10,000 youths per year.

Fifth, new state-specific programmes that address unique challenges — like Udaan (for unemployed graduates) and Himayat (for entry-level service-jobs) in Jammu and Kashmir — are being scaled up. An end-to-end value chain — for identifying youth, training, placement and post-placement counselling and support — has been created. More than 20,000 young people have already been trained and placed in the state through these two programmes, and the target is 1.5 lakh over the next five years.

Of course, a lot more needs to be done and is on the cards. The single biggest reform in the works is the amendment to the archaic Apprenticeship Act, to make it easier for companies to hire and train apprentices. Apprenticeship has been a successful model of skilling youth in countries like Germany and Japan. This reform alone can increase the number of apprenticeships in India from the current 2.4 lakh to 30 lakh a year. Two hundred community colleges are being set up within existing colleges and polytechnics to enable youth pursuing higher education to become more employable. Skill development is one of the activities approved for spending under Corporate Social Responsibility (CSR) as per the new Companies Act 2013.

India has made a tryst with its demographic destiny. Skilling its youth is giving it a chance to redeem this pledge.

Ramadorai is chairman, National Skill Development Agency. Pande is officer on special duty, Union ministry of rural development