Getting private sector to develop skill

By Lekshmi Parmeswaran
In Education
February 8, 2016

The government should incentivize the private sector to train workers in order to take advantage of the demographic dividend


India will not be able to capitalize on its manpower if measures are not taken to skill its population

Perhaps the biggest of all anomalies lies in the Indian labour market. The country which is known for its excellent quality of labour is also the country with almost 90 per cent of its workforce falling under the unskilled or semi-skilled category. This is of particular concern when viewed against the job opportunities that the economic growth has opened up. The present scenario would essentially mean that a substantial portion of the workforce that gets added every year would remain unemployable. The demographic dividend which the country is expected to witness by the year 2030* when 68 per cent of its population will be in the working age group, might in all probability become its greatest of all curses, if appropriate steps are not taken immediately.

India will see a situation where due to economic and technological advancements, the requirement for manpower will be at an all time high but the lack of skilled labour will push the country back in the developmental race. With a little more than a decade left for India to face this challenge upfront, the need is almost immediate to formulate new strategies and implement them.

Skewed approach

So how did a country that is making the world stand up and take note of its achievements in different spheres fail to empower its working class. The answer to this can be understood only if one understands the complexities of the Indian demographic set up in which majority of population lives in rural areas with very poor educational infrastructure. The phenomenon of urbanization also brought with it the migration wave. People who were till then rural agricultural labourers saw in cities an opportunity to find work on a regular basis. Most of them having had no background in any formal education migrated to cities only to find that they were unemployable in industries that were technology driven.

The situation was further aggravated by a developmental plan that excluded the casual workforce. The government offered skill development initiatives through 17 of its ministries to enhance the employability of the population. But the stress on secondary education as minimum qualification for enrolling in the programs meant that it did not serve the purpose for which it was initially conceived. In fact it became a medium for the systematic exclusion of informal sector workers from the ambit of development.

In a country where illiteracy is still rampant and where in spite of having the right to education as a fundamental right, the state has not been able to control the dropout rates, nor has it been able to provide enough earning skills to students who stick to school. In fact, education as a fundamental right seems to have been put in place without understanding the ground realities. Merely enacting a law is not people worthy of getting an employment and earning a decent livelihood. In addition to this, the government run vocational training centres do not have the capacity to accommodate all the existing unskilled laborers in the work force even if they function to their optimum level.

Another fact which has been overlooked is the long duration of the vocational courses. The casual workers dependent solely on daily wages can ill afford to attend courses that run for a span of six months. Without any remuneration involved, it is a difficult task to make them see the benefits of acquiring a new skill.

The policy mismatch between the central and state governments has contributed in no small measure to the majority of Indian workforce remaining unskilled and unemployable. Since vocational training falls on the concurrent list, policies are often formulated without taking the area specific demand and supply chain into consideration. Also there is no effective mechanism in place to monitor the implementation of the policies at the grass root level where it is most needed.

Engaging the private sector

With the International Monetary Fund predicting the Indian economy to grow by 7.3 per cent in the current financial year, the role of private sector assumes importance. The companies in this sector are more attuned to technological innovations and have a clear understanding of the growth of labor market. They are also the most affected due to the dearth of skilled labour in the country. They are often faced with the tough choice of the project getting stalled or to incur heavy expenditure in bringing skilled labour from outside.

Some of the companies like Reliance and Larsen & Turbo have tried to reverse this situation by starting their own skill training units to train the workers. But this is not enough to encourage entire private sector to follow suit. The existence of the Minimum Wages Act and the Industrial Disputes Act which has put restrictions on the downsizing of workforce make the companies hesitant to invest in training. Even though casual workers fall in the unregulated sector, the fear of the authorities using the legal provisions to arm twist the private companies have always loomed large.

The government on its part has chosen to ignore these concerns and have not made an attempt to address the issue of skill deficit by involving all the stakeholders. According to a study released by the National Skill Development Corporation, the top five employment generators in the coming years will be: infrastructure, informal sector, automobile, building and construction industries and textile and clothing. It is very evident from the list that the country will be in need of masons, electricians, plumbers and the like in large numbers. Only the involvement of private sector can help in upgrading the skill of the workforce.

But for this to happen, it is necessary for the government to encourage the companies by providing financial incentives. Dr Meenakshi Nayar, founder president of Etasha Society, a non-profit organization providing vocational training elaborates further, “The need to significantly increase support for skill development is unquestionable. Since the Corporate Sector values tax breaks the most, a valued incentive would be to allow the expenditure on skill development to be treated as an expense and therefore be tax deductible”.

Companies should also be encouraged to pay stipend to the workers enrolled in the vocational courses so that they can sustain themselves throughout the duration of the course. The government instead of increasing the number of training institutes should use that money to support the companies taking the effort to train the workforce. This way the companies will be able to take in even those who can’t be employed in their facilities. The goal should be not just to train enough number of people required to complete a particular project but to enlarge the overall skilled workforce of the nation.

The government can also make laws that will allow companies to show the money that they spend on training as part of their Corporate Social Responsibility (CSR) initiatives. This is a win-win situation for both corporate and workers, and will encourage more companies to invest in skill enhancement of workers.

India can emulate models from Germany and China towards achieving this objective. Germany allows students to opt for vocational training after nine years of compulsory education. As Right to Education has become a reality in India, this approach will help in encouraging people from weaker sections to enroll their children in schools. The lessons that India can learn from China is to organize its informal workforce. Beijing has taken the first steps in registering all the migrant labourers. For India which has a high rate of intra-state and inter-state migration, this might prove to be a crucial step in identifying the sectors which require skill upgradation.

The government’s skill development initiatives rests on two major pillars; the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) which will provide financial rewards to the candidates who successfully complete the program and the Recognition of Prior Learning’ (RPL) which is aimed at certifying the workers from the informal sector on the skills they already possess. This program can yield positive results only if the private sector which is well aware of the present day needs is roped in. There is also a need to revamp the RPL scheme where the beneficiaries are given a chance to learn the latest developments in the fields of their expertise.

An economy will grow only if both the government and the private enterprises work in tandem. The government should recognize the technical know-how of the private sector and formulate policies taking the macro-economic factors into consideration. The end goal should be to reap the benefits of the demographic dividend to the maximum extent possible and make the country grow at a faster rate.