The National Skill Mission and the Indian Economy: an Appraisal

Skills and knowledge are the driving forces of economic growth and social development for any country. Countries with higher and better levels of skills adjust more effectively to the challenges and opportunities of world of work.

Prime Minister Narendra Modi launched the National Skill Development Mission on July 15, which happens to be the first ever World Youth Skills Day. He unveiled the new National Policy for Skill Development and Entrepreneurship-2015 and rolled  out on an all-India basis the government’s flagship scheme Pradhan Mantri Kaushal Vikas Yojana.

National Policy on Skill Development (NPSD) approved by the Government has set a target to skill 500 million persons by the year 2022. Concerned central Ministries will involve respective departments of state Governments and other stakeholders to achieve the target. The details of target for different Ministries/Departments is MoL&E would train 100 million and the same is planned to be achieved through the following schemes:

Name of the Scheme                                                               Target 

Craftsmen Training Scheme                                                      29.4 mn

Skill Development Centres                                                      57.2 mn

Apprenticeship Training Scheme                                             05.4 mn

Skill Development Initiatives through MES                                 11.0 mn

DGE&T field institutes                                                            0.5 mn

Total                                                                                        103.5 mn

NSDM is an ambitious scheme to tackle the problem of unemployment rampant in India due to low-skilled people. Along with other schemes such as Pradham Mantri Kaushal Vikas Yojna, Skill loan schmes and National policy for skill development and entrepreneurship,it aims to reap the demographic dividend of India by providing adequate institutions and opportunities for the youth. It seeks to include Industrial Training Institutes(ITI), Vocational training at school level, and polytechnics to achieve its mission.

Skills development is an area that spans across all sectors of the economy. From manufacturing to services and agriculture, skilled labour is a key requirement to fuel the growth engine of any economy. The key stakeholders in skills development are the Industry (both the Service and the Manufacturing sectors), labour, Academia, and the Government. Growth and productivity in any part of the value chain in a sector will substantially contribute to the national economy and automatically attract FDI inflows. Productivity is directly affected by the efficiency of labour and capital inputs. Therefore, labour needs to be sufficiently skilled as per the changing industry dynamics, in order to contribute to growth. India has seen increased FDI inflow in recent years especially in the manufacturing sector. SSCs (Sector Skill Councils) have been set up across various sectors such as automobiles, retail, security services, food processing and so on, to bring together all the stakeholders on to one platform. The NSDC is the leader in setting up of these SSCs.

India’s skill development initiatives of skilling approximately 500 million people will not only benefit India but also make India the ‘global manpower hub’. Among the developing countries of the world, India has the highest potential to meet the skill gap with its large, young, English speaking population. The world shortage of skilled manpower will stand at approximately 56.5 million by 2020 . With a target of skilling 500mn by 2020, India can not only fulfil its own requirements but can also cater to the labour shortages in other countries such as the U.S., France and Germany. Presently 80% of the workforce in India (both rural and urban) does not possess any identifiable or marketable skills. Therefore, bridging this gap (through the various skill development initiatives) could make India the global hub for skilled manpower, and also result in a surplus of skilled manpower of approximately 47 million by 2020.

India’s workforce, the second largest in the world after China, needs to be trained across four levels, from the ‘White Collar’ workers to the ‘Rust Collar’ workers, linking them to job opportunities and market realities. The skills challenge becomes acute for India considering that the country has a large portion of its population below 25 years of age. This young population can be transformed into a productive workforce giving the Indian Economy a ‘Demographic Dividend’. Currently a major proportion of this population is not productively engaged in economic activities due to a ‘skills v/s jobs requirement’ mismatch. The skills v/s jobs mismatch often leads to economically inactive working age group people. This not only impacts the economy, it also has serious consequences for the society at large. Social unrest such as insurgency, red belt has been witnessed in several areas of India should be heeded with a measure of urgency.

The world (both developed and developing economies) is experiencing an ever widening gap between the demand and supply of skilled labour. The world’s population is growing old. By 2050, the world population of people above 60 years will hit the 1.3 billion mark. This trend will lead to the widening of the demand-supply gap, especially in the developed nations like America, Germany and France. On the other hand, India is emerging with one of the youngest populations in the world comprising of a highly mobile, English speaking population. India will have a 2 billion sized English speaking work force by the end of 2020. Training such a workforce will imply that India can become the major exporter in the services sector as well as an exporter of manpower itself. It is estimated that by 2022, India will face a demand of 500 million skilled workers. India could look at preparing the workforce for global opportunities so that it can utilise its premium position as the human resource reservoir. Given the dynamic labour markets it is also important that the workforce learns and readies itself as quickly as possible. To reap the benefits of “demographic dividend”, the Eleventh Five Year Plan had favored the creation of a comprehensive National Skill Development Mission. As a result, a “Coordinated Action on Skill Development” with three-tier institutional structure consisting of (i) PM’s National Council (ii) National Skill Development Coordination Board (NSDCB), (iii) National Skill Development Corporation (NSDC) were created in early 2008. Whereas, Prime Minister’s National Council on Skill Development has spelt out policy advice, and direction in the form of “Core Principles” and has given a Vision to create 500 million skilled people by 2022 through skill systems (which must have high degree of inclusivity), NSDCB has taken upon itself the task of coordinating the skill development efforts of a large number of Central Ministries/Departments and States. The NSDC has geared itself for preparing comprehensive action plans and activities which would promote PPP models of financing skill development.

As per the approach paper to the 12th five year plan the quality of employment in organized sector is generally high though the scope of additional employment generation in this sector is rather limited. Significant employment generation is taking place in tertiary sector, particularly, in services industries. Self-employment and small business continue to play a vital role in this regard. It is, therefore, necessary to promote main employment generation activities like

(a) agriculture,

(b) labor intensive manufacturing sector such as food processing, leather products, textiles

(c) services sectors: trade, restaurants and hotels, tourism, construction and information technology and

(d) small and medium enterprises.

Private sector could work in greater coordination and come together to address this issue. And it is important that both sectors compliment each other’s efforts. The corporate houses could participate actively in industry led skill development programmes and by channelizing funds allocated for corporate social responsibility into funding and supporting the skills development initiatives by the government. They could be instrumental in moulding and evolving the existing skills development infrastructure in India as per the changing market dynamics, which only the industry has the best knowledge about. International collaborations could help capture the learning’s of the sector and also creating PPP models that are around the implementation of skills programs. The knowledge transfer focus on sharing the experiences of success as well as failures which has helped in the evolution of the skills systems in different countries. India Inc needs to reach out to the teeming millions. The economic implications in terms of the opportunity cost of not timely training the swelling workforce will be very high. Lack of skilled workforce may slow down productivity, research and development and ultimately lead to reduced international market share, which may be very difficult to regain if we fall behind in the race. We may permanently loose momentum and the demographic dividend may end up becoming a demographic liability. However tapping this opportunity may not only have the potential of positioning us ahead in the race but can also position as game changers.