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The Future of Skill Development in India

Higher Education

Arvind Ilamaran

Associate, Research

Centre for Civil Society

Yesterday I attended, ‘The Future of skill development in India’, a fascinating panel discussion at the VCCircle Education Investment Summit 2013, New Delhi. The interesting part of the session was when the moderator of the panel, Praveen Chakravarty, indicated how we have been talking about the future of skills development for far too long (VCCircle had a similar panel discussion at their 2011 edition of the same event).

Many factors are attributed to the sluggish growth of skill development sector in India. But this is not an India-centric phenomenon. Industry experts and policy academicians have been forewarning the world governments for long about an impending skills mismatch epidemic. There are two reasons which are of primary concern. Firstly, the demographic dividend is becoming unfavorable and secondly, there is an employability deficit in terms of what the education institutions provide in the curriculum and what the industry actually requires. The former is prevalent in developed nations while the latter is prevalent in developing nations.

A McKinsey report released last year projected that global labor force strength will be 3.5 billion by 2030. The report states that India could face a surplus of low-skilled workers in the tune of 27 million and deficit in the medium-skilled workers to the tune of 13 million. This implies that more people could be trapped in subsistence agriculture or in urban poverty as we move into the mid-term review of our 12th Five year plan.India’s workforce today stands at nearly 472.9 million. India and has nearly 340 million adults without work-relevant skills and in need of training. Between 2010 and 2030, India would have 27% of the world’s share of  tertiary educated labor force.

The story is that we are going to have a deficit of medium skilled labor and surplus of low skilled labor. A developing country like India needs both the export-oriented manufacturing sector and consumption-driven domestic market for a balanced economic growth. Both of them though are related. Domestic markets become resilient with increased consumer expenditure which in turn increases with rise in real wages. Real wages will increase, among other factors, with greater labor mobility towards high-value sectors. For India, that would mean a massive movement from agricultural to industrial jobs. But the manufacturing sector which is usually the largest consumer of medium-skilled workers saw an employment growth of only 4.4% between  2004-05 and 2011-2012. This is just one-fourth that of services sector and one-sixth that of construction sector during the same period. According to the 12th Plan document, employment in manufacturing fell by five million between 2005-06 and 2009-10, after adding about 12 million jobs between 2000-01 and 2004-05. The McKinsey report adds that the trend in manufacturing has to be reversed, as 183 million job seekers are expected to join the workforce through the next 15 years.

What does this mean for the skill development sector in India? The National Policy on Skill Development is an attempt to increase labor mobility from low-skill to medium-skill segment. There are two probable scenarios that arise now. One is that job growth is greater or keeps pace with labor skill-upgradation and other where it does not. No significant issues are foreseen in the former scenario but if it is the latter then the critical question is, what are the alternative employment opportunities for the upgraded labor? The emigration of low-skill labor from India to Middle-East and high-skill labor to USA and other developed countries is already prevalent. But what will have to be facilitated in the future is the emigration of medium-skill laborfrom India to the global market. This will require in return two issues to be resolved. Are the standards of training and certification in Skill Development in India comparable to that of the global standards, hence facilitating labor mobility without cost of additional certification or assessment? And are the immigration regulations of the different countries liberal enough to facilitate easy labor mobility? If our certification standards aren’t global then the cost of certification per capita would significantly increase, the magnitude of increase remains to be calculated. This would in turn mean that the government’s reimbursement of INR 10,000 per student in vocational training may need to be revised. The status quo today is that, we have achieved globalization in capital and goods but globalization in labor is strongly resisted by local political economy and vested interests. For Indians to be able to push for liberal immigration rules in other countries especially those that will need medium skill labor such as the developed nations, a pro-active foreign policy is essential.

All of this points to the simple fact that skill development in India is a cross-departmental issue that needs concurrent engagement in multiple dimensions. But unfortunately the policy debate today is predominantly unidirectional and linear. This will require us to go back to the drawing-board. While the need is imminent, the interests lie more with the business community to push the political establishment to approach the issue with greater concern.

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