The 3 challenges to skill development in India – and how to tackle them

As structural, demographic and technological shifts transform the Indian economy and the nature of work, new entrants to the labour force will have to be skilled and made employable. Approximately 70 million additional individuals of working age (15-59 years) are expected to enter the country’s labour force by 2023 – using the same estimation model, the total workforce will then include approximately 404.15 million people. This will include 59 million youth (individuals aged 15-30 years), according to our analysis of data from the Periodic Labour Force Survey (PLFS) 2017-2018. Strategies for reskilling and increasing the skills of the current workforce, as well as formal recognition of informally acquired skills, will also have to be reinforced.

Against this backdrop, India is driving unique initiatives to convert its demographic potential into a dividend that will fuel the country’s growth. At the same time, ageing populations found in several developed countries present opportunities for the migration of skilled persons from India to the benefit of both the host and destination countries.

There have been three major challenges to skills development in India: expanding public sector collaboration with industry and the private sector, creating pathways for international mobility and addressing women’s low participation in the labour force.

Here’s how the National Skill Development Corporation (NSDC) has approached them:

Creating avenues for private sector engagement has been a crucial strategic pillar for India. Skill development faces several forms of market failures, including information asymmetries – a skilled person knows his or her skills, but a potential employer does not; if employers had all the information, their willingness to pay for a skilled person would rise. Recognition of Prior Learning (RPL) is an example of an intervention to address information asymmetry.

Another market failure in skill development is externalities. For example, when a firm spends resources on developing the skills of an employee, he or she can quit and join another firm, thus benefitting the latter firm and not the firm that incurred the training cost.

Where there are such market failures, there is a prima facie rationale for government intervention. As A.C. Pigou argues in 1912's Wealth and Welfare, firms themselves do not have an incentive to spend on developing the skills of their workers, because, as mentioned, a skilled worker can quit and join a new firm. Workers have an incentive to invest in their own general skill training through, say, apprenticeship (wherein they are willing to work for lower pay) or self-paid training, as they stand to potentially benefit from higher salaries when they switch jobs. As such, firms may be willing to spend on developing specific skills of employees.

In India, there are a variety of skill development models – government-funded programmes that fully or partially subsidize training/apprenticeships, market-led trainings (where trainees pay for the course), market-led apprenticeships and industry-led/on-the-job training. The not-for-profit National Skill Development Corporation (NSDC) was set up as a public-private partnership (PPP) to stimulate private sector participation in the Indian skill development sector. A core role of the NSDC is, therefore, providing long-term development finance to organizations to build for-profit vocational training initiatives. We also work closely with the Ministry of Skill Development and Entrepreneurship (MSDE) to implement government grant-based vocational training programmes, where infrastructure is set up by private providers and training costs are subsidized by the government.

Collaboration with industry has been fundamental to ensure the relevance and quality of skills training and for building the institutional structures required to achieve the desired outcomes. Sector Skill Councils (SSCs) were incubated by the NSDC for fostering industry connections and developing an industry-relevant course and curriculum. There are currently 37 SSCs operational, with more than 600 corporate representatives in their governing councils.

India’s labour force above 30 years of age is 262 million people, according to our analysis, of which 259 million are currently employed and need to be future-ready. As such, our work has also used industry partnerships to drive reskilling and upskilling initiatives and to develop close collaborations with employers to prepare their workforce for new technologies and the future of work.

There is a vast segment of informal workers in India, many of whom possess skills that have not been formally recognized. RPL interventions are critical in this scenario – holding a formal certification can improve an individual’s bargaining power. In a third-party evaluation of the RPL component of the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) conducted by Sambodhi Research and Communications, 75% of RPL-certified individuals said they were more prepared for their current job and 79% said that the programme has made them more confident about getting a better job.

The same analysis suggests the monthly incomes of RPL-certified individuals were on average 19% higher than those who had not been RPL-certified. An average increase of 25% in income after certification was reported.

Analysis of an as yet unpublished household survey conducted by the Centre of Monitoring Indian Economy (CMIE) suggests there are more than 390 million individuals who have acquired skills informally – through self-learning, on-the-job learning, inherited skills or other sources. Of these, a majority (384 million) are working, showing the scope for RPL and apprenticeship-related interventions. Both of these interventions typically involve collaboration with industry and the private sector, even when they are part of publicly funded programmes or schemes.

India is committed to becoming the “skill capital” of the world and structured efforts such as the India International Skill Centre (IISC) programme are evidence of this. A new, market-driven IISC network has been proposed to counsel and guide potential emigrants with a focus on skills tests, upskilling, language and pre-departure orientation. Furthermore, the governments of India and Japan are cooperating to implement Japan’s Technical Intern Training Programme (TITP), an on-the-job training scheme providing three to five years of internship opportunities for foreign nationals in Japan, with NSDC as the implementing organization.

Technical collaborations have been undertaken with countries such as the UK, Australia and the UAE for benchmarking and mutual recognition of standards. Government-to-government and B2B partnerships are also being developed for new markets such as those in Western Europe, Canada, Australia and East Asia to increase the mobility of blue and white-collar Indian workers.

A third focus area for us is addressing the challenge of low female participation in the labour force. Our analysis of labour force survey data suggests that of the country’s labour force of 395.2 million, only 91.6 million are women.

Skilling initiatives – complemented by a wider push towards empowerment through gender sensitization, creation of economic opportunities and economic and social support – can be used to raise this number. Providing residential facilities for women trainees, embedding mentoring and coaching in skills programmes and providing social support through mechanisms such as local workshops have all been explored.

Preparing women for forms of employment that are more attractive to them, such as the gig economy and its more flexible work models, is especially relevant, given that 229.2 million women (out of the 301.5 million who are not in the labour force) report their status as “attending domestic duties”, in our analysis.

Encouragingly, our progress so far in terms of creating access to skill development for women has been positive. More than 50% of the candidates trained under PMKVY are women. A significant number of women have also been trained in unconventional roles, such as in the electronics and hardware sectors. On our paid courses, women account for 40% of trained candidates. Here too women are increasingly enrolling for unconventional job roles, such as field technician, organic grower and automation specialist. Several training providers in our system focus exclusively on women and are promoting skill training in areas including digital and financial literacy, entrepreneurship, website design, 2D and 3D design, hardware repair and farm management. Partnerships with industry to support women-centric projects in non-traditional trades have also been explored.

Many organizations are stakeholders in the skill development sector and have gained rich experience and knowledge from their work in the space. The lessons they have learned from skills training provision and the implementation of innovative models must be used to take the sector to the next level. We need the platforms to share this knowledge and these diverse perspectives. In addition, engaging with research organizations, academic institutions, think tanks and multilateral institutions that focus on education, skills and labour markets is critical if we are to build new initiatives and collaborations, deepen the knowledge pool on skills and facilitate the creation of institutional knowledge and capability.