Skill Development: Challenges and Opportunities in India

ANANT PRAKASH PANDEY
4/30/19
SKILL DEVELOPMENT: CHALLENGES IN INDIA
Skill Development: Challenges and

opportunities in India
Executive Summary
India is at the cusp of youth population boom with largest number of young people in the
world. Poor focus on quality education during 80s and 90s has led to large proportion of
unskilled and lowly educated persons joining the workforce. Recent focus on the education
has improved the education attainment but quality and relevance of the education system is
a big concern across primary, secondary as well as higher education. Academic achievements
sans industry linkage makes the school to work transition a herculean task. The situation in
the vocational education and training is more worrisome due to additional challenges of
stigma associated with it, lack of infrastructure in remote areas, quality of training, mismatch
of skills between demand and supply, shortages of qualified trainers and assessors, industry
participation and lack of resources to fund such a large-scale skilling, upskilling and reskilling
efforts. Over the recent past, government has initiated institutional and policy reforms by
establishing a central ministry for overall coordination along with host of supporting
organizations to bring standardization and uniformity in the fragmented space of skill
development. However, the policy makers are still struggling with core problem of
accessibility, quality, industry participation and resource mobilization for this mammoth task.
This paper analyses the demographic profile, opportunities, efforts being undertaken
and the challenges with the current efforts. Focus on the job creation through improving the
ease of doing business is a prerequisite for job creation and absorption of the trained
candidates.
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A brief study on the salient features of one of the most successful models of vocational
education and training namely the German model is also undertaken.
Finally, the key lessons from the German model on developing an integrated
vocational education system with formal education, imbibing the duality principle of work
place learning along with school-based learning and genuine industry participation to
strengthen the vocational education and training system show the policy makers in India a
robust method of harnessing the demographic dividend in the coming years.
Context
Background
India is home to 1.36 billion people accounting to 17.7% of the total world population with
median ages of 27 years(Worldometers, 2019) and likely to surpass China in population by
2028 when both will have about 1.55 billion people(Review, 2019). The working age
population of 672 million people between 15-59 years account for 62.5% of the population(C.
o. India, 2011, p. 18). Youth population of age group 15-29 years constitute 27.5% and
between age group 15-34 years is 34.8% of the total population(MOSPI, 2017, p. 11). This is
important when compared to declining trend of Europe(23.7%) and Norther
America(27.03%)(MOSPI, 2017, p. 16).
This demographic dividend is an asset for India and can fuel the engine of growth and
development in India through focused interventions on improving human capital. Research
have shown that Human capital formation and development of country is highly related.
Importance of Human capital is illustrated by the fact that High income OECD countries have
Human capital share of 70% of the total wealth as compared to 40% in case of low-income
countries(Carey, 2018, pp. 123,130-133). The contribution of increased working age
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population share to the economic growth in Asian economies of China, Japan and Republic of
Korea has been estimated to be 26%, 9% and 29% respectively as per Bloom and Finlay(Finlay,
2008, p. 13).
India’s demographic analysis shows the increasing share of working age population
over the years from 55.83% in 1970s to 66.22% in 2017(Bank, 2019b). India has shown
impressive economic growth in the past couple of decades with an average of about 7%
growth in GDP(Bank, 2019a) however the human capital per capita is very low in India($8755)
and India is ranked 117 out the 141 countries in terms of Wealth of Nations(Carey, 2018, p.
228).
Labor market and Employment profile of labor force

India sector-wise contribution to GDP and employment scenario has undergone significant
changes since independence. As per World Bank data and shown in the Fig 1 below,
Agriculture and allied sector contribution was 42% in GDP in 1969 and has decreased to 15%
in 2017. The employment percentage of 64% in Agriculture and allied sectors, 14% in Industry
and 22% in services sector in 1991 has changed to 41%, 24% and 35% for respective sectors
in 2018.
Fig 1.
Sector-wise employment & Agri sector contribution to GDP

70
60
50
40 Agri contribution to GDP
30 Employment % Agri
20
Employment % Industry
10
0 Employment %Services
1960 1970 1980 1990 2000 2010 2020 2030
Year
Source: World Development Indicators
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The above chart shows the transition of sectoral employment but Agriculture is still the
largest sector in terms of employment absorption. Growth in services sector is a unique
feature in Indian economy without the conventional transition from agriculture to
manufacturing and then to services sector as has happened in most of the developed
economies. Manufacturing sector has 0.7% formal employment and rest is informal with
small firms operating at 12% productivity and pay 19% of wages of skilled manpower (World
Bank 2012).
Labor market structure is traditionally hierarchical and segmented with 93% of total
work force in the informal sector including self-employment which is very high when
compared to that in Brazil (51%), Mexico(50%), Indonesia (78%) and Thailand
(49%)(Commission, 2012-17, p. 131). 49.5% persons are estimated to be self-employed
followed by 30.9 % as casual labor and only 16.5% were wage/salary earners and the rest 3%
are covered as contract workers(Employment, 2013-14, p. 30). Only 60.5% worked for 12
months, 34.5% worked for 6-11 months, 1.1 % worked for 1-5 months and 3.7% did not get
any work(Employment, 2013-14, p. 34). About 65% of workers are in enterprises with less
than 6 workers which speaks volumes about the vulnerability of the labor force as these
enterprises employ casual and contractual employees without any social
protection(Commission, 2012-17, p. 132). Youth employment is all time high- 18.7% of men
and 27.2% of women in age group 15-29 years are searching for job with overall
unemployment at 6.1%(Kaul, 2019).
Educational status of the labor force

Out of the labor force of 431 million persons the details of the education level in work is as
below(Commission, 2012-17, p. 140):
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Illiterate 29%
Up to Primary level 24%
Middle & Secondary level 30%
Higher Secondary 7%
Technical diploma or certificate not equal to degree 1.4%
Graduate and above 8.6%
Source: NSS 66th Round 2009-10
The profile of the workforce shows that large percentage of workforce is illiterate or low
educated mostly working in informal sector and are lowly paid or in vulnerable employment.
The vocationally trained in the age group 15-59 years is around 10% of the labor force. More
than 40% of the labor working in Agriculture and allied sector is illiterate. The proportion of
vocationally trained workers was highest in services sector at 33% followed by 31% in
manufacturing and 27% in Agriculture. Agriculture constitutes for highest number of
informally trained workers(Commission, 2012-17, p. 142). Females are further marginalized
in terms of educational attainment and employment. A pictorial representation of the
education profile of the labor force of India is placed at annexure 1.
Scale and scope
As per the World bank development indicators, on an average 7 million persons were added
to the labor force every year since 2000 although other estimate is 12.8 million persons
annually are entering the labor market. Among the persons of age 15-59 years, about 2.2 %
received formal vocational training and 8.6% had non-formal vocational training(NSSO, 2011-
12, pp. 44-45). This high percentage of untrained and unskilled labor constitutes the main
cause of labor force landing up in vulnerable and low paid informal employment.
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On one hand there is very low percentage of formal training as well as informal
training, on the other, the quality of limited current training and education is also abysmally
low with no linkage to the world of work. 47% of the students from various educational
background are employable with engineering at the highest of 57% , polytechnic at 18% and
Industrial Training Institute at 30%(Wheebox, 2019, pp. 26-27). Only 30% of those trained
under the Skill India Mission found jobs in 2017-18(Shukla, 2018). These figures portray a
bleak picture of the skilling efforts at national and subnational level. There is tremendous
scope of improvement in the ongoing program and strategy of the government. A problem
tree analysis is attached at annexure 2 for comprehensive analysis of the problem, its root
causes and the effects of the problem.
Nature of jobs
Research have shown that almost 40-50% of existing jobs will be automated and roles of
repetitive, routine nature will be robotized(Wheebox, 2019, p. 22). 69% of the jobs in India is
susceptible to automation(G. o. India, 2017). With growing uberisation of economy, the
nature of jobs will undergo large-scale transformation. The numbers of jobs created or
destroyed is debatable but it is true that due to reorganization of jobs in the emerging
platform economy, additional challenges in adaptation to new technologies and further
informalization of jobs is expected to rise(Kenney & Zysman, 2016, p. 5). Such transformation
of jobs would require upskilling and reskilling the current labor force in a major way.
Incremental skilled manpower requirement has been estimated to be 109 million by
2022 across 24 major sectors of economy(PIB, 2015) and this has been revised through
recently conducted environment scan report to 103 million(MSDE, 2018, p. 7). The total
training capacity including the short-term training under the National Skill Development
Corporation and long-term training under Industrial Training Institutes account for
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approximately 10 million. With the available infrastructure of training capacity, the
incremental skill requirement of 109 million by 2022 will not be met.
Institutions involved
The skilling ecosystem comprises of multiple stakeholders including policy making bodies,
regulatory agencies, training delivery agencies, industry associations, national and state level
coordinating bodies.
A) National Skill Development Mission is the highest coordinating body chaired by the Prime
Minister to provide overarching guidance and review progress at the highest level.
Ministry of Skill Development and Entrepreneurship (MSDE) is the apex body for policy
formulation, setting standards, coordination amongst different organizations working for skill
development. Ministry is supported by National Skill Development Agency (NSDA) which
regulates the qualification standards, conducts research in the skills sector and also mandated
with development of Labor Market Information System (LMIS). National Skill Development
Corporation (NSDC) is a public-private partnership body primarily for enhancing the training
capacity in the country by providing soft loans to interested organizations. NSDC is also
involved in establishing the Sector Skill Councils (SSC) which are the industry led sectoral
bodies responsible for setting occupational standards and sectoral labor market information
system. Director General of Training (DGT) is the coordinating body under the Ministry for the
Industrial Training Institutes in the country. National Council of Vocational Training (NCVT) is
the accreditation body for the Industrial Training Institutes(MSDE, 2018).
B) Ministry of Human Resource Development (MHRD) governs the formal education sector in
the country including Universities, technical colleges, polytechnics and schools. MHRD
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introduced vocational education in schools starting form class IX onwards and also in the
higher education domain(MSDE, 2019).
C) Ministry of Rural Development runs rural skilling scheme for the rural youth as part of the
National Rural Livelihood Mission (NRLM)(DDU-GKY, 2019).
D) Other Central Ministries- There are 19 other Ministries in government of India which are
also running schemes for skill development.
E) State Skill Development Missions are established in each state for coordinating the skill
development efforts at the state level and to bring synergy among the multiple central and
state-run schemes.
Efforts on skill development can be categorized in three levels
Institutional framework
Formation of National Skill Development Mission, setting up a Ministry of Skill Development
& Entrepreneurship, National Skill Development Agency, National Institute for
Entrepreneurship and Small Business Development, National Skill Development Corporation,
Sector Skills Council and Labor Market Information Systems.
Policy framework
National skill development and entrepreneurship policy,2015 for overall guidance on skilling
efforts, National Skill Qualification framework and National Skill Quality Assurance
Framework for establishing the quality of qualifications, quality of training and quality of
assessments.
Programmatic framework
MSDE and 19 other central ministries run more than 40 schemes for skill development for
training of 10 million persons in the country annually(MSDE, 2018, pp. 116,117).
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Categorization of skilling effort can be on basis of domain of skilling
Skilling in formal education system
MHRD runs several skill programs at the school level, community college, polytechnic and
University level in the formal education system(MHRD, 2019).
Skilling in vocational domain
MSDE and other Ministries run skill development programs either in their own training
centers like government ITIs, Tourism Institute or in partnership with Private training
partners.
Skilling by Enterprises
Formal training by some of the leading firms like TATA Motors, Siemens, Samsung, Bosch and
so on have their own training institutes for training although it is not significant
numbers(Okada, 2012, pp. 184-185).
Stakeholders in the Skilling ecosystem
The key stakeholders and their key function are as below:

National-level: Ministry of Skill Development and Entrepreneurship: National policy &
coordination
National Skill Development Agency: Quality Assurance & Labor Market Information System
National Skill Development Corporation: Industry-linkage and private training capacity
Director General Training: Government and private ITI training regulations
Sector Skills Council: Occupational Standards, Assessment and Certification and Train the
trainer programs
Training Providers: Training delivery system for different programs/schemes
State-level
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State Skill Development Mission: State Skill policy, coordinate training in state and mobilize
finance
Students: Candidates wanting to get trained or trained
Other Ministries: The norms and standards to be adopted to run their schemes
Placement Agencies: These agencies help in placing candidates in different companies and
coordinate with the training providers
Assessment Agencies: The assessment of trained candidates as per norms and policy decided
by the government is done by these agencies.
Challenges
Infrastructure capacity and Access
The total training capacity is developed close to 10 million which includes a large number of
poor quality government owned and private training centers as approximately 10 million are
being trained annually under all the schemes of government of India(MSDE, 2018). Compared
to the incremental requirement of 103 million by 2022, this is highly inadequate as annually
35 million need to be trained to achieve 103 million in three years. Most of the training
centers are located in urban areas and rural backward areas are highly neglected in terms of
availability of training(Sharma, 2018, p. 385). This inaccessibility is more challenging for
female candidates as there are other concerns of safety and cultural norms in rural areas on
sending girls to far off places for training.
Quality of Education and Skills training
As per the ASER report, only about one third of all the children in grade VI-III can do basic
arithmetic and about 25% leaving standard VIII are without basic reading skills(ASER, 2018,
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pp. 11-12). Similarly, the quality of skills training is also very low reflected by the low
percentage of absorption into jobs by the industry(Times, 2018). Further many of the trained
candidates either do not get job or end up in doing jobs in professions unrelated to their
training(Mukherjee & Rastogi, 2018, p. 65). Quality of trainers are very low. This low
attainment of education levels and skills level leads the candidates into vulnerable and low
paid informal employment.
Industry interface
Private sector involvement in the skill training was envisaged through twin ways.
a) Establishment of National Skill Development Corporation (NSDC) as a public private
partnership body set up by Government with 51% share of private sector and 49% by
government. NSDC was mandated to enhance the training capacity by supporting private
sector investment in training infrastructure. However, this has not happened as private sector
contribution is abysmally low in the NSDC and it mostly runs on the government funded
projects(Prasad, 2018, p. 19).
b) Establishment of Sector Skills Council (SSC) as industry led bodies responsible for
development of occupational standards, certification, assessment and reflect the demand of
employers through sectoral labor market information system. But most of the standards
made by SSCs are very narrow and do not reflect the industry consultations and similarly most
of the SSCs have not been able to develop labor market system. The quality of assessors
empaneled by SSCs are very substandard. As assessment and certification was a revenue
stream for SSCs, they compromised with quality to maximize the revenue(Prasad, 2018, pp.
54-55). Another component missing in the industry consultations is role of worker
associations which has not been included in any of the occupational standards development
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endeavor(Comyn, 2014, p. 381). This leads to low level of training not relevant to industry
needs and resulting in low employability of the trainees and hence low absorption of trainees
by employees.
Multiplicity of efforts
More than 40 schemes of skill development are being run by 20 central ministries besides the
state-level schemes(Tara & Sanath Kumar, 2016, p. 239). This has created confusion among
the trainees as well as training providers as for similar training different schemes are having
different cost & job placement norms. It also results in duplication of efforts by the
government.
Creation of Jobs
Although the Indian economy is growing at an impressive rate over the past couple of decades
but the number of jobs created is not commensurate with the economic growth. One of the
key factors is slow growth in the micro, small and medium enterprises (MSME) which is one
of the largest employers in the industry sectors. India’s ranking of ease of doing business is at
77 out of the 190 countries(Bureau, 2018) which is one of the key reasons for low job creation
as companies find hard to set up business in India due to bureaucratic hurdles and number of
regulations. Job creation is very important in the value chain of skilling efforts as qualified and
well-trained people need to be absorbed in industry to be economically productive. MSME
sector has huge potential and in the past years it has shown impressive growth(Hindu, 2019)
but much more needs to be done in terms of ease of doing business to attract investments in
the country.
There are several other challenges in terms of Skill training and recognition of skills of informal
sector workers, gender mainstreaming of skill training, shortage of trainers, assessors,
finances and integration of vocational training with the formal education to name a few. For
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the purpose of this paper, however, my focus for analysis is on the basic framework of skill
ecosystem as explained in preceding paras and vocational education and training model of
Germany.
Successful international Model
German Vocational training system
German vocational education and training system has evolved over a long period of time.
They laid the foundation of their vocational education on centuries old class-based craft
education. The salient feature of their system involved the transfer of responsibility of
developing curriculum, examinations and supervision of craft apprenticeship by the chambers
or guilds(Mehrotra, Kalaiyarasan, Kumra, & Ravi Raman, 2015, p. 260). Vocational education
is imparted in full-time schools or within the dual system which forms the core of the
vocational education and training in Germany. The system is also known as dual because
training is conducted in companies as well as in vocational schools. Trade unions and
employers play a key role in VET provision through their involvement in qualification and
training design. Chambers of trade are competent bodies to oversee the apprentice training
and examination of trainees(Hippach-Schneider, 2016, p. 15). The regulatory framework
draws its strength from Vocational education and training act in 1969(EU, 2019, p. 10).
The importance of dual system is underscored by the fact that 47.8% students chose the
vocational education and dual training system in Germany is highly successful in school to
work transition(Hippach-Schneider, 2016, p. 16). A complete chart of national education and
training system for Germany is at annexure 3.Vocational education is provided at upper
secondary schools, vocational schools, apprenticeship, post-secondary level, senior
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vocational schools, specialised upper secondary school, tertiary level, advanced vocational
qualification, trade and technical schools and higher education with full scope of mobility and
progression in the education and training system(Hippach-Schneider, 2016).
The dual training graduates get highly recognized certificates from the chambers and this
model of firm-based training produces smooth labor market transitions resulting in low
unemployment rates(Kleinert, Vosseler, & Blien, 2018, p. 34). Under federal law 70% of the
time spent by trainees is into practical training including on the job training or separate
training centres and 30% in school for theory. The curriculum is also similarly divided into
2/3rd occupational and 1/3rd general subjects(Remington, 2017, p. 8).
Lessons from German VET system and Recommendations
Vocational Schools
Establishment of vocational schools at different levels including in rural areas. This would help
in reducing the dropout as well as smooth school to work transition. This also will take care
of the lack of capacity and accessibility of training in the country. The integration of the formal
schools with vocational schools should be done with National skills qualification framework
for ensuring progression and mobility across the streams.
Duality principle
Dual system of education and training on job improves the employability of the trainees as
the success of German system has shown. Skill development training in India is plagued with
too much focus on the theory and the practical component is also given in the
classroom/laboratory. This does not inculcate the real-life shop floor or on-the-job learnings
and there will always be gap between the requirements of Industry and skill trainings at
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training centers. Adaptation of German model of integrated training of classroom and
practical training in industry will improve the competences of the trainees and make them
more employable(Remington, 2017, p. 10).
Partnership between key stakeholders
Partnership between social partners, public institutions and educational institutions is
cornerstone of the successful model of German vocational education and training(EU, 2019,
pp. 18-19). Sector Skills Councils have been established to represent industry but it is more of
bureaucracy rather than actual participation by Industry. Different models of partnership
have been successful in countries like USA, China and Russia taking clue from the German
model of institutional complementarities. Multiple firms committing to practical training in
cooperation with school-based training helps in removing the problem of under provision of
training out of employer’s fear of poaching like in Western Massachusetts and in Greensville
, small firms have formed association and work to align the curriculum of training institutions
to needs of the industry(Remington, 2017, p. 15). If it is too costly for small firms, the few
large firms collaborate with schools and act as anchor of partnership like IBM and Volkswagen
in USA(Remington, 2017, p. 16). Participation by industry for providing apprenticeships,
infrastructure, trainers, assessors, resources and development of demand driven
qualifications is highly recommended to have a successful skill development system.
Conclusion
India is passing through a critical phase of demographic dividend which will be lasting for
about 25 years till 2045. This is a golden opportunity for India to develop human capital
through skilling, reskilling and upskilling its burgeoning work force. While government’s focus
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on basic education has enhanced the formal schooling enrollment and overall educational
attainments across age, the quality of the education is a huge concern. Vocational education
and training are minimal as compared to developed countries. During the last decade,
government has undertaken institutional and policy reforms but a lot remains in terms of
training infrastructure, access, quality and industry interface. The training ecosystem hinges
on three basic pillars of quality of qualifications, quality of training and quality of assessment.
Development of industry relevant qualifications through their genuine participation will
ensure the smooth transition from education and training to world of work. Quality assurance
of training and assessment builds credibility and trust among the clients of the trained
candidates. There is huge deficit of quality assurance in the current skill training system which
is evident from the outcomes of the trainings in form of poor absorption of the trained
candidates in the industry. Although industry is the biggest beneficiary of the skilled
manpower, the contribution from industry is very low both in terms of support by trainers,
assessors, infrastructure as well as funding support in partnering with government.
Given these complex challenges, it is imperative for policy makers to study the best
working models like Germany’s vocational education and training system and inculcate the
best elements of the German model. The highly evolved mechanism of industry participation
through chambers and industries in collaboration with unions in every step of training system
including qualification development, management and training of apprentices is highly
acclaimed. Tackling the access problem through establishment of vocational schools along
with integration with formal education system would remove the notion of vocational
education as dead end of a person’s education attainment. Any model would require
contextualization to local situation to meet the needs of the local demands. Given the
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widespread difference between Germany and India both in terms of informal economy,
education attainment and other local factors, policy makers in India need innovative
strategies to imbibe the best elements of the German system to suit to the Indian context.
Job creation is another major area to be focused for absorption of the skilled person through
improving the ease of doing business. A quality assured vocational education and training
system would meet the challenge of development of largest human resource in the world and
propel India to league of developed nations.
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Annexure 1
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Annexure 2
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Annexure 3
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ANANT PRAKASH PANDEY

Skill Development: Challenges and

organizations to bring standardization and uniformity in the fragmented space of skill

education and training namely the German model is also undertaken.

robust method of harnessing the demographic dividend in the coming years.

median ages of 27 years(Worldometers, 2019) and likely to surpass China in population by

important when compared to declining trend of Europe(23.7%) and Norther

America(27.03%)(MOSPI, 2017, p. 16).

development in India through focused interventions on improving human capital. Research

countries(Carey, 2018, pp. 123,130-133). The contribution of increased working age

Labor market and Employment profile of labor force

Sector-wise employment & Agri sector contribution to GDP

Source: World Development Indicators

largest sector in terms of employment absorption. Growth in services sector is a unique

feature in Indian economy without the conventional transition from agriculture to

compared to that in Brazil (51%), Mexico(50%), Indonesia (78%) and Thailand

(49%)(Commission, 2012-17, p. 131). 49.5% persons are estimated to be self-employed

enterprises employ casual and contractual employees without any social

unemployment at 6.1%(Kaul, 2019).

Educational status of the labor force

below(Commission, 2012-17, p. 140):

Up to Primary level 24%

Middle & Secondary level 30%

Technical diploma or certificate not equal to degree 1.4%

Graduate and above 8.6%

Source: NSS 66th Round 2009-10

manufacturing and 27% in Agriculture. Agriculture constitutes for highest number of

informally trained workers(Commission, 2012-17, p. 142). Females are further marginalized

in terms of educational attainment and employment. A pictorial representation of the

education profile of the labor force of India is placed at annexure 1.

Scale and scope

causes and the effects of the problem.

susceptible to automation(G. o. India, 2017). With growing uberisation of economy, the

platform economy, additional challenges in adaptation to new technologies and further

Incremental skilled manpower requirement has been estimated to be 109 million by

approximately 10 million. With the available infrastructure of training capacity, the

incremental skill requirement of 109 million by 2022 will not be met.

development. Ministry is supported by National Skill Development Agency (NSDA) which

the accreditation body for the Industrial Training Institutes(MSDE, 2018).

higher education domain(MSDE, 2019).

National Rural Livelihood Mission (NRLM)(DDU-GKY, 2019).

also running schemes for skill development.

Efforts on skill development can be categorized in three levels

Formation of National Skill Development Mission, setting up a Ministry of Skill Development

& Entrepreneurship, National Skill Development Agency, National Institute for

Entrepreneurship and Small Business Development, National Skill Development Corporation,

Sector Skills Council and Labor Market Information Systems.

training of 10 million persons in the country annually(MSDE, 2018, pp. 116,117).

Categorization of skilling effort can be on basis of domain of skilling

Skilling in formal education system

University level in the formal education system(MHRD, 2019).

Skilling in vocational domain

numbers(Okada, 2012, pp. 184-185).

Stakeholders in the Skilling ecosystem

The key stakeholders and their key function are as below:

National Skill Development Corporation: Industry-linkage and private training capacity

Director General Training: Government and private ITI training regulations

Training Providers: Training delivery system for different programs/schemes

Students: Candidates wanting to get trained or trained

coordinate with the training providers

by the government is done by these agencies.

Infrastructure capacity and Access

availability of training(Sharma, 2018, p. 385). This inaccessibility is more challenging for