India is one of the youngest nations in the world with the average Indian being 28 years; the average Chinese is 37 years and Japanese, 48 years. Of the nearly 135 crore Indians in 2021, around 34 per cent (46.42 crore) were below 19 years, and nearly 56 per cent (75.16 crore) between the age of 20 and 59. By 2041, this demographic will change, but with 59 per cent (88.97 crore) of its population between 20 and 59, India could be the world’s largest pool of human resources.
To convert this pool into human capital will require steadfast focus on skilling and education Over the next two decades, the labour force in the industrialised world is expected to decline by 4 per cent, while in India it will increase by nearly 20 per cent. India could become the supplier of talent and skills if its workforce across age groups is equipped with employable skills that keep pace with the exponentially changing technological ecosystem.
The 2015 Report on National Policy on Skill Development and Entrepreneurship had estimated that only 4.7 per cent of the total workforce in India had undergone formal skill training compared with 52 per cent in the US, 80 per cent in Japan, and 96 per cent in South Korea.
A skill gap study conducted by the National Skill Development Corporation (NSDC) over 2010-2014 indicated an additional net incremental requirement of 10.97 crore skilled manpower in 24 key sectors by 2022. In addition, 29.82 crore farm and nonfarm sector workforce needed to be skilled, reskilled, and upskilled. Thus, the National Skill Development Mission estimated that 40 crore Indians needed to be skilled by 2022.
A 2020 NSO survey revealed that one out of every eight students enrolled in a school or college drops out before completing education; 63 per cent of these are at the school level. The maximum dropouts occur at the upper primary (17.5 per cent) and secondary school (19.8 per cent) years. Less than 40 per cent students pursued higher secondary and/or higher education. These dropout trends combined with estimates of skilling requirements by NSDC reveals that a significant effort has to be mounted to take advantage of our positive demographics.
The ecosystem
The skilling ecosystem in India dates back to 1956. Over time, a fairly vast institutional system for training and skills has evolved. This includes 15,154 Industrial Training Institutes, of which 11,892 are private; 36 Sector Skills Councils, 33 National Skills Training Institutes, and 2,188 training partners registered with NSDC.
The flagship Pradhan Mantri Kaushal Vikas Yojana (PMKVY) scheme was launched in 2015 with a budget of ₹12,000 crore to benefit one crore youth with industry-relevant skill training for better livelihood. With a Kaushal Kendra in each Parliamentary constituency, nearly 1.35 crore candidates have been trained and 24.14 lakh reportedly placed by 2022.
The SANKALP programme with an outlay of ₹4,455 crore, and the STRIVE project with an outlay of ₹2,200 crore are other significant skilling interventions. The ITIs are post-secondary schools that have been at the heart of the skill development endeavors in India since 1969. Between 2015 and 2022, the number of ITI seats available increased from 15.8 lakh to 24.92 lakh. But 44.37 per cent of seats remained vacant.
About 2.16 crore candidates have been enrolled in ITIs and PMKVY in the nearly 16,000 centers over the last seven years through an outlay of ₹22,500 crores under MSDE schemes and about ₹600 crore provided to the Directorate General of Training for ITIs and associated institutions.
In addition, nearly 40 skill development programmes are implemented by 20 central ministries/departments. MSDE contributes about 55 per cent of the skilling achieved. Initiatives by all ministries have resulted in nearly four crore people being trained through various formal skills programmes over the last seven years, as compared to the target of skilling 40 crore people by 2022.
With the rise in higher education GER (gross enrolment ratio) to 27.1 per cent, and diverse skilling initiatives at the Central and State levels, India has substantially addressed the education and skilling needs of the incremental annual addition of 1.2 crore youth to the workforce.
However, it is the upskilling and re-skilling needs of the larger working population that have been largely unmet. According to PLFS data 2019-20, 86.1 per cent of those between 15 and 59 years had not received any vocational training. The remaining 13.9 per cent had received training through diverse formal and informal channels.
There is more than enough evidence that upskilling the already employed workforce could lead to greater productivity in the economy, higher incomes for workers, and higher profitability for firms. Hence, PMKVY could equally prioritise upskilling initiatives in the PPP mode. Many countries have proactive participation from industry players in their skilling efforts.
In the UK, the UK Employer Levy on large employers was introduced to fund increased apprenticeship. In Australia, industry-directed training packages were devised and managed by industry-led skill bodies. Germany follows the dual TVET systems where in-school training is funded by the government and out-of-school training by employers. These practices have relevant lessons for the Indian skilling effort.
Corporate participation
Since the implementation of the mandatory CSR law, corporations in India have invested over ₹100,000 crore in diverse social projects. Of these, about ₹6,877 crore was spent in skilling and livelihood enhancement projects. Maharashtra, Tamil Nadu, Odisha, Karnataka, and Gujarat were the top five recipient States.
According to a NASSCOM Report in 2021, every rupee invested in skill training programmes earned a return of ₹2-19 measured on the basis of the candidate’s salary. The average was an impressive ₹6.67, implying 600-plus per cent return on outlays on training. Thus, investing in skill development is a win-win solution for corporate India as well as the nation.
In the last two years, PLI schemes with an outlay of ₹1.97-lakh-crore across 13 key sectors have the potential to create national manufacturing champions and generate employment opportunities for the country’s youth. However, for sustained success, the scale of the skilling effort both for the entrant workers and even more importantly for the existing workforce would be vital. It is only by raising the quality of skills of its existing workforce, that India will be able to meet its aspirational development goals.
To complement government efforts, systematic corporate investments in skilling could play a decisive role in attracting larger investments at the national level. Corporations could consider industry-level collaborations to provide industry-specific skills. This would be a CSR investment with a substantial social return, while adding to the availability of quality manpower for their respective sectors. During this decade, India Inc. can play a catalytic role in increasing the availability of skilled manpower in the country.
Shah is senior specialist, and Kumar is vice-chairman, NITI Aayog. Views are personal