Sending India to work: Challenges and the Road Ahead

India has the world’s highest population in the young, employable bracket and sending it to work is the biggest challenge our government faces right now. Failure to do so would result in the biggest opportunity for India’s growth story turning into its biggest liability. Presently only 2.3% of the Indian workforce has undergone formal skill training, as compared to 68% in UK and 52% in the US. Most of India’s workforce is trained on-the-job and there is limited infrastructure, scope or resources for advanced skilling. The industry complains that labor trained at ITIs is not job-ready and courses in skilling centers need to be organized in better co-ordination with the industry.

The National Skill Development Corporation (NSDC) was started on 6 June 2013 as an autonomous body to coordinate and harmonize the skill development efforts of the government and the private sector.

Following are some key facts about NSDC and skilling industry in India:

  • The NSDC plans to provide vocational training to 400 million young people by 2022 with a Rs2500 crore budgetary outlay
  • It works on a public-private partnership model and supports private organizations willing to open skilling centers with grants, loans, course material, fee subsidies, industrial access and the recently started placement services
  • At present there are 3000 training centers, 265 training partners spread across 517 districts of 28 states so far
  • NSDC also monitors the quality and implementation of the skilling programs
  • The training material is designed in association with the local industries and review meeting held regularly ensure the curriculum is up-to-date
  • Industries are increasingly relying on training partners for their human resource needs and subsidize the education of students
  • NSDC has trained more than 36lakh individuals, 62% of them were placed at the centers
  • The sectors NSDC is catering to are construction, healthcare, BFSI, communication, education, retail, transportation and logistics, textiles, food processing, engineering and metal products, electrical products, chemicals, plastics, hospitality, minerals, pharma, beverages and ITeS.

The Business Models

Major private sector partners of NSDC include Centum, WSI, Sahaj, 24X7Tech Support and GCS Group among others. There are four categories of business models in the vocational training sector.

Consumer Based model is for high aspiration sectors like Healthcare, Hospitality, Tourism and Grooming. Students with financial resources opt for these courses which cost higher than other categories.

Industry Based model is for sectors with high demand and high aspiration like ITeS, Retail, Construction & Food Processing. Such courses are subsidized by prospective employers. Industries also pay for up skilling needs of their workforce.

Government Based model is for sectors with low aspiration and high demand like Mining, Power and Textiles. Courses are usually subsidized by the government and students with modest financial resources opt for these courses.

STAR Scheme: is a special government subsidy for opening centers in the most backwards districts of the country. Training partners are subsidized per student enrolled in courses. NSDC is however mulling to discontinue this scheme due to difficulty in judging the accuracy of reported enrolment numbers and reports of misappropriation of funds.

Efficient and large scale training partners usually follow a hub-and-spoke method for organizing their infrastructure and maximizing reach. A hub, located in a local town serves as the biggest training center and is usually equipped with infrastructure and machinery necessary for training. The spokes are usually classroom based smaller training centers in rural locations. Establishment of a spoke is preceded by extensive publicity and outreach campaigns in local areas and trainings are started once requisite number of registrations are recorded.

Once the supply of an area is exhausted, usually in 6 months to one year, the subsidiary center or spoke moves to a new rural location and the cycle of publicity-registration-training-placement is followed again. The subsidiary training centers share infrastructure with local hubs and students are sent to hubs for practical training and up skilling.

Key Problems

This model, though efficient, is not sustainable for smaller players entering the market as they have to arrange for funding partners, publicity expense, trainers and the entire infrastructure every few months as centers move from one location to another, further draining their limited resources obtained from wafer thin margins.

Training partners described publicity as the most challenging aspect of their business. The social perception of skilling courses as low-paying jobs, lack of trust in private players and managing aspirations of the young population are challenges that need to be dealt with at the grassroots. For example, construction and infrastructure industry is set to generate the maximum number of jobs in the upcoming years in the country. However an NSDC survey placed construction at the bottom of the aspiration/desirability index. Most of the young jobseekers prefer more comfortable IT jobs, a sector which does not recruit from NSDC centers in large numbers.

It is also difficult to decide on an ideal location for the training center. Most of the new jobs would be created in a handful of industrialized states including Maharashtra, Gujarat, Tamil Nadu, Karnataka and Punjab. These states are facing a peculiar labor shortfall and unemployment at the same time due to unwillingness of local youth to join the industrial sector. To further complicate the situation, very little and insufficient industrial activity is predicted in the biggest population growth centers of the country viz Uttar Pradesh, Bihar, West Bengal and Rajasthan.

Hence, more often than not, the source of labor is far from the final location of employment creating logistical and coordination issues with managing labor migration and the location of skilling centers. A research survey reported in Scroll conducted by an NGO Pratham, that works in the skilling space, concluded that as many as 77% of the “placed” students returned back to their home villages within one year of employment. 80% of the trained and placed individuals cited reasons such as homesickness, inadequate food and accommodation or language problems as the reason for their return. Only 2% of the respondents indicated low-salaries as the reason.

Some Solutions

So, as it plans to skill million of Indians, the government and its partners also need to focus on mitigating the toils of migration. Interventions by Pratham towards helping workers find proper accommodation, building social bonds, creating spaces for interactions and information exchange recorded that the ‘within 3 months’ dropout rate decreased from 52% to 15%. This could be an often ignored key change in the current skilling and retention efforts.

NSDC employed multiple organizations including Deloitte and KPMG for ‘Skill Gap’ studies to estimate the demand and supply of labor across various sectors and districts in 2013. The same can be used for deciding the location of future training centers and the skills to be taught there.

Standardization of vendors, cost, fee and development of new vendors catering to the sector and sharing of information between partners would lead to bringing down of operational costs for all players operating in the sector.

However, the most important intervention would be if NSDC either takes over or helps the publicity and placement efforts of the training partners. A centrally publicized “Dial-for a-Job” campaign for prospective trainees and “Dial-for-an-employee” missed-call campaigns supported by full-fledged call centers would be monetarily efficient and more effective than individual low-scale efforts at the local level. However, the training capacity would have to be rapidly scaled up match the supply of students and demand of employees resulting from large scale marketing efforts.

Sharing of infrastructure between different players would benefit the smaller players entering the segment. Infrastructure at “hubs” could be shared with newer players for an optimum fee bringing down the cost of new entry. However, if existing players would be open to such an idea remains to be seen.

NSDC’s plans are as ambitious as they are important. The head of one of NSDC’s top five partners, in an interview with Business Standard, described the targeted skilling volumes a “huge risk”. He explained, “All you are doing is creating bad debt. You’re spreading money out to hundreds of new companies who will never be able to pay you back.” The mission, however, if successful could be the single biggest contributor to push India’s growth trajectory in the right direction.

This article has been contributed by the Consulting club of IIM Indore.

IIM Indore

This article is published by Media and PR Committee, IIM Indore