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The Great Indian Skilling Challenge

The Great Indian Skilling Challenge

Skill India is a major part of the Prime Minister's Make in India programme, because without quality labour, one cannot make anything. The FM has set aside Rs 1,700 crore in the 2016/17 budget in order to set up 1,500 PMKVY Multi Skill Training Institutes around the country.

Photo: Ajay Thakuri Photo: Ajay Thakuri

"The spirit is willing, but the flesh is weak".

Pick that line from the Bible and supplant it on the Indian economy and it will stay true. Finance Minister Arun Jaitley's stretched target to expand the government's skill training programme to cover 10 million youth in three years may appear practical under ideal circumstances, but not when the economy is reeling under a slowdown. Over these three years, India's formal labour force will have to expand by 28 per cent, and gross domestic product (GDP) will have to grow by at least 10 per cent, if there are to be enough jobs with decent pay. With global conditions the way they are, and manufacturing languishing in India, this is a hard prospect.

Moreover, the economic growth required to absorb these jobs is substantial. Assuming a monthly salary of Rs 10,000 for each of the new hires at entry level jobs, it results in an annual wage bill of nearly Rs 1.2 lakh crore. If the wage bill on an average is 10 per cent of overall business costs (a conservative estimate), the increase in annual revenue that is needed in three years' time just to support the wage bill of these new hires is Rs 12 lakh crore, or 10 per cent of India's current GDP.

Skill India is a major part of the Prime Minister's Make in India programme, because without quality labour, one cannot make anything. In addition to the 18 or so ministries already offering skill training programmes, the NDA government last year set up the Ministry of Skill Development and Entrepreneurship (MSDE), and launched the Pradhan Mantri Kaushal Vikas Yojana (PMKVY). The FM has set aside Rs 1,700 crore in the 2016/17 budget in order to set up 1,500 PMKVY Multi Skill Training Institutes around the country.

Under the scheme, private training partners can register and undertake skill training for candidates. In turn, candidates can register with the scheme and opt for a particular training provider to hone his of her skills. In this way PMKVY, according to Jaitley, has already trained 7.6 million youth around India. He does not say how many have got jobs as a result.

The skills themselves are largely entry-level, though in a variety of trades. Standards of training are set by the Sector Skills Councils (SSCs), which are industry bodies. Trainees under PMKVY are offered a financial reward and a government certification on successful completion of training and assessment. Presumably this certification will improve their chances of finding a job. There is also a provision for entrepreneurship support under the scheme.

If PMKVY aims to cover 10 million youth, the real measure of the success of the programme will be in the number of trained youths getting jobs. Worse, the youth who enrol for training and cannot find a job are also a risk of social unrest.

The real problem with the ambition of this training target is that it may not be matched by the underlying economy. A quick calculation reveals that it will take serious growth to create enough jobs for the trained youth.

The 10 million trained youth will require 10 million (new or replacement) jobs. The Census of India 2011 puts the main workforce in India at 362 million workers. The Economic Survey 2015/16 puts the share of formal labour at most at 10 per cent in the period between 2004/05 and 2011/12, or roughly 36 million. Therefore, finding jobs for these trained youth will require an addition of nearly 28 per cent to India's formal labour force over the next three years.

Even if some of these trained youth become entrepreneurs, the scale of the challenge is daunting. Not only the economy, but also job creation, particularly at entry level, needs to grow rapidly. With the country's limited manufacturing base, and reduced appetite for expansion in the services sector, the prospects for this are low. One possible solution is to export the surplus labour, namely, to work with foreign governments and industries to meet their manpower needs. According to a report by the Boston Consulting Group, skilled labour shortage forecast for a group of OECD countries is likely to be 57 million by 2020. And this does not include the needs of countries in West Asia and Africa. There is a major opportunity there.

But for this to happen, there is a lot of work to be done. The issues of immigration, work permits and local support for migrant labour need to be addressed before any large scale international provision of skilled labour is possible. This is where industry bodies and the Ministry of External Affairs can help.

But if the government is to meet its skill targets and its ultimate objective, it is time to turn attention back to the domestic economy.

The author is a freelance journalist based in Delhi