Developing and implementing a vocational skill development policy for micro, small and medium enterprises (MSMEs) is a challenging exercise, especially for emerging countries. While imparting of vocational skills should typically be demand-driven, MSMEs have neither the incentive nor the necessary fiscal/human capital or scale to train workers.

Therefore, any skill development policy for MSMEs should be supply-driven. However, supply-driven vocational skill development policies run into the issue of a mismatch between what the skilling/training agencies are supplying and what firms want (NCAER Skills Report 2018). On the demand side, too, MSME workers typically need to be multi-skilled.

One solution to overcome this mismatch is to provide cluster-based vocational training. Broadly, there are three approaches.

The home-grown initiative involves public-private partnerships (PPPs). The IL&FS had started a cluster-development initiative, working in PPP (public-private partnership) mode with governments on MSME manufacturing clusters. The Tripura Bamboo Mission (TBM) is working to develop a value chain in the bamboo industry in the State, starting from bamboo plantations (farmers) to producing bamboo handicrafts (self-help, producer groups, etc.) to actually help connect with the markets through both digital and off-line means. TBM provides the skilling and training needs throughout the value chain.

However, when NCAER interviewed private enterprises in 2016 in the bamboo industry, located in Agartala but outside the TBM, found that the interaction between MSMEs and local Industrial Training Institutes (ITIs) was rather limited.

The objective of the Model ITI programme, launched by the Centre in 2014, was to upgrade some of the government ITIs into model ones. The key idea was to improve industry-ITI interaction. The ITIs would be located in industrial clusters. An industry partner chairs the Institute Management Committee, providing inputs in course curriculum, upgrading of skills of teachers and providing internships, apprenticeships and employment, etc. In a mid-term evaluation of the scheme in 2018, differences were found in the levels of involvement of industry partners.

German model

Germany has one of the better vocational skilling models in the world. There are several German institutions working on both the supply and demand sides of skilling — training workers and upgrading business member organisations so that they can come together on the skilling aspect, along with other aspects. Elements of dual training systems had been introduced by the Ministry of Skill Development and Entrepreneurship in partnership with German International Cooperation in automobile, electronics, and construction clusters in India.

Under the aegis of the Indo-German Chamber of Commerce, dual vocational training programmes are being provided by German auto companies in Pune since 2015 with a vocational training partner in the city. The course enables trainees to focus on practical skills and applications, get shop floor experience in their respective training companies and join the working world immediately after graduation with great prospects for their future.

Despite the many initiatives, a field trip to Karnal in December 2021 revealed that the clusters had little interaction with the ITIs or any vocational training partner. Maybe larger companies hired apprentices but there was nothing more than that. The MSMEs continued to report lack of skilled workers as a major constraint. Yet, the cluster-based vocational skilling model has not been successfully scaled up. The policy question is: How to improve the interaction and, thereby, matching of skills between local industries and vocational training institutes?

The Draft MSMEs 2022 policy emphasises skill development at the district level and recommends assessment of the demand and supply of vocational skills. This should be done at the level of industrial clusters as well. The District Industries Centres (DICs) may map the clusters in their regions and understand their skilling needs. It is recommended that the DICs work with the industrial clusters, local vocational training partners, especially ITIs and State-level departments. The idea is to increase interactions between all stakeholders and address skilling gaps.

Interactions between industrial clusters and ITIs may include elements of the Model ITI scheme and other examples cited above. It is recommended that the DICs act as a bridge between local clusters and State-level departments in terms of transmitting skilling needs on a real-time basis. Further, the ITIs may offer short-term courses for upskilling/re-skilling, especially during evenings/weekends. Public and private financing may help address these challenges.

The matching between industry needs and skilling providers has to improve if we want to address employability and employment issues in the backdrop of the Covid-19 pandemic.

The writer is a Senior Fellow at NCAER. Views are personal