One of the top nine priorities of the Union Budget is employment and skilling. In line with this, three schemes were announced to promote skilling. The first scheme involves increasing the maximum loan amount for high-end skilling courses under the revamped Model Skill Loan Scheme from ₹1.5 lakhs to ₹7.5 lakhs, with an interest rate of 1.5 per cent per annum.
This scheme is expected to empower the youth by providing easy access to advanced-level skill courses.
Recognising the significant role played by non-banking finance companies (NBFCs) and micro-finance institutions in the skill loan market, the Ministry of Skill Development and Employment (MSDE) has made pivotal modifications to the scheme.
Credit access
This includes the inclusion of NBFCs, Micro Finance Institutions, and Small Finance Banks to extend loans backed by a guarantee against default up to 75 per cent of the loan disbursed through the instrument of collateral-free loans of up to ₹7.5 lakh to facilitate 25,000 aspirants every year.
To ensure uninterrupted credit flow in the skilling sector and to provide low-income youths with access to affordable finance for specialised skill courses, the MSDE initially launched the Credit Guarantee Fund Scheme for Skill Development in July 2015.
But the low fund utilisation under the scheme over the past decade was due to the low ticket size of loans up to ₹1.5 lakh, even as course costs and fees rose due to inflation, leaving many high-cost courses out of the scheme.
Secondly, private banks still need to be more willing to finance government-sponsored schemes. As of March 31, 2024, loans amounting to ₹115.75 crore were extended to just 10,077 borrowers over the past decade.
Relevant skills are in demand, and the cost of acquiring specialised skills is higher. Only 5 per cent of the so-called skilled workforce is formally trained, creating a significant skilling gap.
New sectors
An initiative like the Model Skill Loan Scheme opens doors to many skill courses in sectors such as healthcare, beauty-wellness, IT, AI-data science, cloud applications, digital marketing, hospitality, animation, gaming, graphic designing, and drone technology.
The second scheme is aimed at skilling 20 lakh youth over five years. The scheme, with a total outlay of ₹60,000 crore, aims at fulfilling this objective by upgrading 1,000 Industrial Training Institutes (ITIs) in the hub and spoke arrangements with outcome orientation. It’s an ambitious scheme that aims to make youth more employable by imparting industry-specific skills.
The third scheme introduced in the Budget is for providing the youth with internship opportunities in 500 top companies. This first-of-its-kind scheme, aiming to cover one crore youth in five years, has the potential to be a game changer in tackling youth unemployment.
Moreover, landing an internship is difficult. Students with professional degrees like MBA, engineering, etc., may still find landing jobs or internships easier after graduation. But it could be more difficult for humanities graduates with no ready-made market-appropriate skill set. So to make this scheme a success a lot depends on its proper implementation.
In the future, the government could consider widening the scope of this scheme by making it mandatory for companies above a specific size to take in a fixed number of interns every year and fund the training programme through their Corporate Social Responsibility (CSR) funds.
Most importantly, the schemes linked with skills could significantly boost the employability quotient of youth. With concrete experience, they will be more likely to land a job. However, implementation, effectiveness, and accountability are crucial to fostering employable skill sets.
The writer is a co-founder and MD of Orane International and a training partner with the National Skill Development Corporation (NSDC). Views expressed are personal