India’s Skills ChallengeFirst Principles, Priorities and Responses

Dr K.P KrishnanSecretary, Ministry of Skill Development and Entrepreneurship

Presentation for NCAER – ADBI – PRI Tokyo Dialogue, 31.10.2017

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The Skills Challenge

▪ 24 million youth enter the 15+ age group every year▪ 47% of children drop out at secondary

school level▪Hence ~10-12 million youth enter the

workforce every year▪Annual training capacity : 2.5 million

▪ India: estimated incremental skilled manpower requirement in 24 high growth sectors, until 2022 : 103 million

▪Globally: net workforce shortfall is 32 – 39 million by 2020 (due to low birth rate and ageing population)

Supply side Demand side

Large young population; Limited training capacity

Significant industry demand for skilled workers

India and globally

Is there a market for skills in India?

What does this market look like?

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The Market for Skills : A Public Economics View

Case for ‘state intervention’, through ‘state provision’

Large divergence between social and private costs/benefits

“Merit good” not “public good”

Market Failure

Skill Development

‘State provision’ not necessarily ‘state production’Strong case for state funding and private sector production

How has India’s skills landscape evolved?

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Long-Term Training Landscape

• Formal Indian VET : ITI system (1950s)• HR obverse of II five year plan industrialization & engineering PSUs• Now 13,351 NCVT affiliated ITIs in India• 84% private & 16% government• Average government ITI

• Large tracts of land• Good building• Poor quality labs/equipment• 50% + teacher vacancies, balance formally qualified, well paid, low motivation

• Average private ITI not likely to be better6

Short-Term Training Landscape

• 2007-17 MES launched by MoLE• ~ Rs.10 billion spent on the scheme• 13,729 private sector skill development providers• 455 private sector assessment & certification agencies

• 2007-09 NSDC launched• About 13000+ accredited TPs• 40 Sector skill councils handle assessment & certification• ~1 crore youth trained, assessed & certified

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What explains these outcomes?

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Public Economics & Skill Development

• State funding with private production calls for different role of “state”• Ensuring value for public expenditure

• Two factors of skill development• Target population likely to be vulnerable• Potential for collusive behavior

• Training quality ensured through• Contracting or regulation

• Indian model was a hybrid• NCVT without regulatory power• Poor contracting & enforcement capacity of DGT & State Governments

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Sub-Optimal Outcomes

Skill India Agenda

Increase scale

Enhance quality and employability

Make skills aspirational

Focus on informal sector and self employment

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What has been achieved in each of these areas?

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Scale: Increase in CapacityLong Term Skilling Short Term Skilling

1381 new ITIs established across India PPP model to cover the uncovered blocks Comprehensive apprenticeship reforms

undertaken NAPS : Increase in no of apprentices from

1.13 lakh in 2016 to 6.4 lakh in 2017

143 % increase in NSDC training centers

600 PMKKs (model skill centers) being promoted across India

5,700 centers accredited and affiliated under PMKVY

Students enrolled

Figures in lakhs Figures in lakhs

Seating Capacity

9.3

3.34*

15.91

10.52

Fee based PMKVY

2013-14 2016-17

Candidates Trained

Figures in lakhs

Quality: Standards and Industry Connect

1,911 QPs and 5,000+ NOS developed and validated by 2000+ companies

All central government scheme NSQF aligned SSDMs and States adopting NSQF for skilling

programs 11 state core committees for NSQF alignment

Course standardisation Course modernisation

63 course curricula upgraded with industry consultations

35 new trades introduced such as Renewables, Mechatronics, Instrumentation

Industry connect

Establishment of Institute Management Committees (IMCs) in 1,227 ITIs German model of dual training with industry introduced on pilot basis 80 short term training courses linked to apprenticeship (pilot launched) 37 corporates contributed over Rs. 100 Cr in CSR to NSDF (2016-17)

Aspiration: Why is Skill Training not an Aspirational Choice?

• Low “signalling value” of skills training, leads to low skill wage premium• The market for skilled workers similar to Akerlof ’s “market for lemons”• Low skills premium persists in India

What is being done? Advocacy and Outreach (kaushal melas/exhibitions/graduation

ceremony/skills competitions) Progression Pathways Improving international mobility and overseas employment opportunities

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Aspiration : Progression Pathways

School dropouts(47%*)

Short term training

Job market

8th /10th standard pass

ITI

Higher education

Polytechnic

NIOSCBSE

47 %* drop out by higher secondary levelUnder implementationOperationalized

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Innovative partnerships to establish centers of excellence in key sectors

Enhancing quality and processes of existing training institutes (CSTARI)

Germany, UK, France, Japan, Switzerland, China, Singapore

82 Indian Qualifications aligned with UKstandards, through SSC partners.

Capacity building of trainers & assessor

UK, Germany, Australia, Canada

Focus: Mutual recognition of qualifications

Partnership with MEA on PKVY. Focus: PDoT and cultural orientation for Indians migrating overseas.

UAE, Japan, Qatar

International Partnerships

India International Skill Centers : 14 IISCs operational - Target of 100 IISCs in 2018

International acceptance Enhanced quality Global mobility

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Enhancing Employability through Entrepreneurship

Integration of Entrepreneurship in Skills Training

Common Norms define employment as both wage and self employment. Entrepreneurship orientation module integrated in PMKVY 2.0 Disaggregated data on wage and self employment in PMKVY 2

• Build a national system for mentorship, to facilitate transition from informal to formal sectors

• Evolve design, process, systems and policies that facilitate effective mentorship for aspiring entrepreneurs

Role of MSDE : Catalyse Shift from Informal to Formal Sector

Skill Development : The Way Forward

• Increase scale• Numbers, disciplines & location• Role of state-LMIS

• Enhance quality & employability• Statutory regulation for quality assurance• Industry connect for employability

• Skills as aspirational• Skill wage premium• Education pathways• Participation in global skills market

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Districts with low capacity utilisationand high density

Districts with medium capacity

utilization and low density

Policy response:Focus on quality

Policy response:Focus on scale and

quality