IMA Analysis

Thursday August 2, 2018

Skilling India: Belling the Cat

NGO Pratham's 2017 Annual Survey of Education Report gave much cause for cheer - since the advent of the Right to Education Act, far more (86% of those surveyed) children are today still in school/college between the ages of 14 and 18 than they ever have been1. In addition to challenges of gender (many more young boys are educated than young girls) and quality of education aside (over 2/3rds of the 28,000-odd children surveyed still failed in basic math or practical applications like counting money), the fact is that 47% of all children still drop out before completing secondary school, losing even that one ticket to a possible formal job years later.

In other words, 10-12 million youngsters enter the workforce each year with almost no education or skills. This is about half the total number (25 million go beyond age 15 every year) coming in, largely ill-prepared for available job opportunities, under ever-greater threat of automation, and without any soft-skills that are equally key in these times in the formal sector. Contrast this further with the number of new jobs being created in that formal sector - approximately 2-3 mn a year (the informal sector creates 50% more) - and the challenge is compounded. Jobs for these new entrants will have to come from higher growth or from newer sectors that fill key gaps in the India consumption story - jobs that demand skills, and not formal university education. Jobs for beauticians, for quality plumbers and electricians, for responsible and literate drivers are wanting by the hundreds of thousands and would fit the profile of youngsters coming out to work faster, quicker, and more localised (the big challenge in India remains one of whether you can take markets to jobs rather than jobs to markets). But for that, India's skilling industry needs to take off. For a multiplicity of reasons, that has not happened fulsomely, yet.

A negative trinity thus far...
A thought provoking discussion with KP Krishnan, Secretary, Ministry of Skills and Entrepreneurship highlighted striking challenges that put all three - a weak public sector, a poor (and mal-intended) private sector and society - in the dock. Skills development is a 'merit good', with its social benefits far exceeding its immediate-term private benefits. The state therefore must necessarily provide for it, but NOT necessarily for its production. All it needs to do is to ensure the right regulatory oversight over the private sector. India's National Council for Vocational Training is that regulator, but it is not its enforcer - that job is of the multiple central and state Directorate Generals of Training, which lack both capacity and zeal to execute.

A ‘clever' private sector that will take the funding and even collude with the largely poor population at whom skills development is targeted to ‘split up the funds' without any classes is the norm. Government funded and run IITs (to meet the country's higher-end engineering needs in the 1960s) and ITIs (to train factory supervisors and workers) were meant to be the creators of skills, both high end and basic. The latter began to lag from the 70s and 80s with large tracts of land and buildings but poor quality labs and equipment and the role was taken over, as intended, by the private sector. Today, of the 14,000-odd NCVT-approved ITIs, 84% are private with cash-strapped state governments providing for the remaining 16%. The vast majority of outcomes - really job placements - are poor, with the quality of teachers (just like in education) being a notable cause. ITIs are perhaps the only institutions, where the trainers are formally required to have only the same qualifications as their students.

But the private sector can shine...
Does that mean there is no hope? Far from it. Outstanding private-sector institutions in the sector see placements far exceeding the number of students. An ITI in Delhi works with Maruti Suzuki, another with ILFS. Others such as NTTF, Don Bosco Technical Institute and Tata Strive are similar. In all of these cases, on-the-job training is built strongly into the programme and job placement exceeds 150%.

The

...and government prioritisation...
The government's efforts in this direction got a new lease of life in 2007 with a ten-year Modular Employability Scheme (MES) and the creation of the NSDC. The MES primarily focussed on short duration skills, and it spurred an entire ecosystem of private training providers, as well as assessment and certification agencies. In total, there are now over 13,000 NSDC-affiliated training agencies, and more than 3.7 million people have been trained, assessed and certified to date. In 2009-10, the Centre created a framework for Sector Skill Councils, which are industry/employer-led bodies - presently numbering over 40 - with responsibility for helping to establish curricula, source the course material, and for assessment, certification and regulatory issues.

...is now being accelerated
Under the NDA government, which is far more cognisant of the need for job creation and equally job fitment than many that have come before it, a fresh attempt was made to overhaul a legacy system. The Ministry of Skill Development was created in 2014, and the Skill India Mission formally launched a year later. The Mission seeks to bridge the gap between the economy's demand for millions of skilled employees (and the supply of millions of raw workers), and the ~1.6 million that get produced by the formal VET system annually. Skill India aims to create massive short-duration skill-development capacity, including through established Government of India programmes like the PMKVY and the DDUGKY. In terms of quality and employability, it seeks to use the NSDC as an implementing agency (in place of government agencies); leverage the sector skill councils to improve employer connect; give a push to apprenticeship; and create a non-statutory regulator for quality enforcement.

The challenge is a many-headed hydra...
The challenge is not simple. Skills acquisition has not been aspirational historically in Indian society. Exacerbating this social ‘looking down upon', skilled and non-skilled workers tend to start at the same wage level in India. Transferability of skill qualifications into educational institutions has thus far also not been possible.

...that is now being attacked through educational mobility and social acceptance...
The Mission seeks to offer educational mobility by enabling a VET certificate-holder to transition into higher secondary school programmes or even to work towards an engineering diploma or degree. The social bit is harder but the Mission is working with brand ambassadors and also creating global opportunities for skilled Indians. For example, India is the first country to sign a formal agreement with Japan on its Technical Intern Training Program (TITP) programme - a mechanism of international apprenticeship, but also a way of importing skilled labour into Japan. (4 ITIs are now recognised by the Japanese authorities under the TITP.) Significantly, too, the German regulators recently recognised a 3-year certificate programme by Coimbatore-based skilling centre, GDTI. With the quantum we need, this may be but drops in the ocean, but the pride in Dr Krishnan as he talked this through as well as the grim steadfastness of resolve, was a learning, to say the least. Drops make an ocean eventually.

...and a re-prioritisation of apprenticeship
The other drop in the ocean that will accelerate change is the largely unnoticed simplification of India's apprenticeship act. In the OECD countries, apprenticeships are really the backbone of skill development and placement, allowing firms to see people at work and decide whom to employ, and also giving crucial on-the-job training. Equally, they are an excellent way of creating a wage premium for skills. In India, however, this is an area that sees only limited traction, mainly because employers view it as being heavily regulated - administered, as it is, by the Labour Department. However, a 2014 amendment to the apprenticeship act that earlier involved tight control over the course content and structure has completely rewritten the law, removing much of the heavy-handed regulation that previously existed. Further, in 2015, the Centre launched the National Apprenticeship Promotion Scheme (NAPS), where the government co-pays 25% of the monthly stipend of every apprentice hired by a private- or public sector employer. There are still relatively few takers of the NAPS, but the programme can succeed with greater employer connect.

Miles to go before we sleep...
Clearly, much remains to be done and teaching is the first big area. Prioritising soft skills is the other, and sorting distribution, a third. On the count of the last, both kind of skills and geographical distribution of skilling centres is skewed right now. A disproportionate number of electricians compared to demand, or too many ITIs without scale in dense areas because of skewed incentives (e.g. a state government pays service providers a per-student fee) are resultant. Finally, you need a much, much stronger regulatory environment to keep both the public and the private sector involved in skills development in line, and to encourage the high quality firms referred to earlier in this paper. Building these regulatory institutions is complex, takes time and resolve. It must however be done, and it must be prioritised.

...but industry must partner, in benevolent self-interest
But the cat, if it is truly belled, also places the onus on industry. India's sector-skills councils, where a number of IMA Forum members have done some great work, are illustrative. On the whole so far, these councils have yielded poor employment outcomes, with placement rates of about 24% on average. Regrettably, in the view of Dr Krishnan, this is largely because the private sector has not taken the councils very seriously, refusing - despite repeat follow-ups - to send senior managers even for interaction meetings. This is in marked contrast to countries like Germany, Australia, Canada and the UK, where chambers of commerce, or craft guilds single-handedly decide on curricula and certification, and where the government's role is solely to recognise the awarding bodies, rather than delving into the content of the training itself.

India's need for productivity will never be higher. Formalisation of the economy itself is a double-edged sword in the short term, as much the existing formal sector and the economy at large will benefit from it. As India's informal sector (with 70% of employment) formalises, its cost of doing business will go up. Productivity is the only answer - our vendor-of-vendor eco-systems will perish otherwise, as will huge swathes of India's entrepreneurs, who compete with imports and in global markets, even in niche, tiny segments. It is also the only answer to the rising focus by state governments on minimum wages, which in sector after sector, albeit justified, must also see proportionate or higher increases in productivity. This is an over simplification for the sake of the argument, but for this and a host of other reasons, our ability to respond with higher productivity at one level and better fitted jobs at the other rests largely on the creation of a skilling eco-system for a vast multitude of India's workforces that are already past the age of foundational education. Efforts in formal education will see benefits ten years on. We do not have the luxury of that kind of time. Skills can be gained in a shorter duration and for much more immediate applicability. On-the-job training is also the most effective.

As industry, the all to action is to review once again what our focus on apprenticeships is, how our inputs into sector-specific councils can be provided, what our expanded training courses are including in terms of skills and skilling. Firm after firm in our Forum reflects these best practices. There is much to be learnt, and much to be done. National peace, and quantum opportunity, could hang in the balance.

The contents of this paper are based on discussions of The India CHRO and CEO Forum in Bangalore with Dr KP Krishnan, Secretary, Government of India, Ministry of Skill Development and Entrepreneurship in August 2018.