Skill Development in India: Big Promises, Tall Failures

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.
-Atul K Thakur
Email: summertickets@gmail.com
(Published in Governance Now on February17,2014)

India's industrial lobbies are crumbling

The return of these institutions to the fold of big business houses and the consequent weakening of executive control in these chambers have damaged their credibility and are detrimental to their sustenance

On hindsight, it is safe to say that India Inc no longer runs through legitimate lobbies. Recent years have witnessed a sharp fall in the quality of leadership at India’s premier business chambers — the Federation of Indian Chambers of Commerce and Industry, the Confederation of Indian Industry, the Associated Chambers of Commerce and Industry of India and the National Association of Software and Services Companies. This has led to sagging morale in business circles, with furious voices emerging from the inside.

The return of these institutions to the fold of big business houses and the consequent weakening of executive control in these chambers are detrimental to their credibility and sustenance. These institutions are more the victims of inner strife than the economic slowdown that has plagued Indian industry in recent months.

It is worthwhile to recall that ‘lobbyism’ is itself a hyper-materialistic term which is often used to refer to the clout of the old boys’ network that uses the backdoor approach to get things done. Lobbying is an established phenomenon in the US, but clearly what may be fine in an alien land is not acceptable in India. Still, some people like a former CII chief (whose untainted reputation lost much of its sheen after the

Radia tapes came into the public domain) have sought to push the culture of lobbyism. UPA2, with its propensity to plunder public resources, has ensured that such systemic ills happily flourish. It is unlikely that the Government’s insensible use of the carrot-and-stick policy which pampered business tycoons, will lead to any improvements. It will only encourage sleaze in business and accelerate the downward spiral in trade.

The crucial issue here is that the Government rarely does anything that is notionally wrong, but routinely falters at the implementation level. The converging of politicians’ business interests with those of the industrialists can only fudge the lines between politics and business.

A recent case in point is the FIR lodged by the CCenttral Bureau of Investigation against Kumar Mangalam Birla. The Government sought to spin the news in its favour but the Supreme Court and a former Coal Secretary did not allow it to hide the Prime Minister’s Office’s explicit mishandling of coal block allocations. Moreover, the UPA’s own Ministers, including Mr Anand Sharma, spoke their mind and expressed displeasure over the Government’s risky adventure against Mr Birla.

The Ministers fear slowing growth in such circumstances — already, India’s corporate entities are turning incompetent. There is also a disconnect between intention and action, making it highly unlikely that the Indian economy will return to its lost growth trajectory soon. There is not much for trade bodies to look into at this point, as the current mess has happened at a high level, leaving no space for third parties to intervene.

The fight is on to save the face of the Government. And, except for the Supreme Court and the Election Commission, no other institution has effective authority to challenge the regime. Through indecisiveness and preferential treatment, the Government is doing its best to damage the entrepreneurial spirit in the country. Unfortunately, no voice can be heard against such moves from the industrial community, instead, it only whines on specific issues wherein its immediate interests come into play. The trade representatives are now pantomime actors.

Besides, these institutions had ceased to be the knowledge institutions long time ago, when motley groups of tainted management consultants begun supplying second-hand wisdom from within the various chambers’ crumbling blocks. Clearly, it is tough to be either on the side of the Government or the industry.

China has controlled its economy and implemented progressive reforms for over three decades, yet, it hasn’t been able to join the league of high-income nations. It is impossible to see India walking a smooth path in the coming years. If the country’s economic performance has to improve, steps must be taken renew faith in institutional frameworks.

Industry is a vital component of the nation’s growth and ‘profit’ is really not a dirty term, if it has some redistributive bearing. Economic growth and redistribution of wealth can happen simultaneously, if the Government and trade and industry learn to work together.Finally, industry chambers too need to wake up and get their act together, if they wish to remain relevant. Or else, they will soon have no role to play at all.
-Atul K Thakur
Email:summertickets@gmail.com
(Published in The Pioneer on October28,2013)

Retrospecting India's IT High Rise

Book Review: Non-fiction/The Coalition of Competitors by Kiran Karnik, Collins Business, 187 pp; Rs399 (Hardback)
Nasscom has over the years played crucial parts as a leading industry body for IT sector in India. Twenty-five years back in Delhi, a meeting attended by spirited young entrepreneurs like, N.R. Narayana Murthy, Nandan Nilekani, Kiran Karnik and others resulted in the creation of this specialised industry body. Further that went on to change the face of India’s software industry. The growing existence of Nasscom sharply got stronger with the India’s economic reforms in 1991, and that immensely helped in unified representation of software industry’s business interest and its taking-off. The story behind the making of India’s software business from $400million in1991to over $60billion presently is well covered in this book.

For chronicalising India’s software business, Kiran Karnik is the most suitable thinker and practitioner with a tremendous track record of shaping a nascent Nasscom to the level of cresting high and also in successfully helping out the mastermindedly scam hit Satyam Computers in its painful transition. India’s IT high rise has indeed given its business a much needed “global synergy “with new bold impression in the broader world, which hitherto was a dream only. From a humble beginning of India’s computing, to the consistent endeavours in the resource scarce private sectors to the high rise have all covered lucidly inside the book.

In the 1980’s, GE group’s Jack Welch’s unusual interaction with Sam Pitroda (As Rajiv Gandhi’s special envoy) had change the course of action forever. A CEO of global stature suddenly became eager to outsource his company’s captive operational works to young entrepreneurs by simply relying on ideas. Interesting to know, those days Indian software companies were severely lacking with the required industrial skills and resources to execute global services orders, but then passion triumphed the adversities. This book beautifully clears that leadership has played pivotal role in the phenomenon rise of India’s software industry.

N.R. Narayana Murthi’s thanks giving to the governments since 1991 strengthens the notion that policies have also positively impacted the IT business. The multiplier effects of IT business have touched the lives in India, with direct or indirect two million jobs at different levels. But it’s also true that in the future, India’s stake in the cheap skilled labour would not remain unchallenged. So, Indian IT companies need a fresh strategy to cope with seamless challenges from the other emerging economies, trying hard to flourish in this domain at global level. The present regulatory lexes are the downside that is haunting the usual growth impetus of Indian industries; software sector is also not proof from such odds.

Unlike the other industries, IT sector can’t even think to survive on domestic demands-global integration is its first fundamental and overlooking it may dampen the spirits and edge that Indian companies have made through the last decades. As this book has more focus on the rising side of IT business, so it fails to see big challenges confronting under the guise of “west’s neo-protectionist drive” that may badly compress the long term prospects of global outsourcing business. Though at some points, Kiran Karnik seems trying to locate few challenges and their potential cure from the industry’s side-in retrospection, this book is worth of reading by those who have enthusiasm for policy issues but for knowing current holistic state of affairs in the IT business, this work may fall short!
Atul Kumar Thakur
May 19th, 2012, Saturday, 2012, New Delhi
Email: summertickets@gmail.com