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Special Content


Issue no 7, 14 May - 20 May 2022

Knowledge And Skill Based Employment Challenge In India

Balakrushna Padhi & Himja

"Talent and skills are valuable in powering knowledge-based economies (Asian Development Bank, 2021)."

With increased globalization, competition, and information, the demand for a trained workforce has increased in both developing and developed nations. To achieve global quality standards, bring advanced technologies, and enhance foreign trade in order to boost industrial and economic development, various nations are thriving to employ skilled workers who can bring a competitive edge to the market. Thus, knowledge and skills are becoming the drivers of a country's social-economic development. Even empirics suggest countries with skilled human capital attain higher GDP and per capita income. With abundant capable and qualified human capital, India has evolved as a knowledge based economy. India does have a unique position to grow its market share in the global outsourcing market which roughly stands around 65 percent currently.

 It is interesting to note that, at the global level, India is uniquely positioned with a promising demographic dividend in comparison to the developed nations that are on the verge of an aging population. Countries such as China, Japan, the US, and European countries are already coping with the issues of an aging population and increasing dependency ratios whereas India has an average age of 29 years and a middleage much below China and even OECD countries. According to the National Policy for Skill Development and Entrepreneurship 2015, the average age of the population in India in 2020 is 29 years which is far less than China, USA, Europe, and Japan which stand at 37, 40, 46, and 47 years respectively. The global population aged 65 and above was 530 million in 2010 and it is expected to double (1.3 billion by 2040) which will lead to a shortfall in the labour supply across the globe. The labour force in the industrialized world is expected to decline by 4 percent over the next 20 years, while it is expected to increase by 32 percent in India. With lower dependency ratios and a rare two-decade window of demographic dividend, India has a comparative advantage which can create an opportunity to become a global reservoir of skilled manpower for the economic development across the globe and within the country itself. Employment generation is the primary focus of any country's developmental process. For this rising young-age population in the country, the issue of employment generation becomes the centre of debate and concern at both national and international levels. Not only this, the need of the hour is productive employment which was missing in the Millennium Development Goals (MDG) 2000. Later on in 2005, the goal of achieving "full and productive employment and decent work" was added as a sub-goal of MDG goal 1. But still, the idea of productive employment didn't get much attention. Only after 2015, the International Labor Organisation

(ILO) argued to bring productive employment to the centre of debate and agenda. Even, the recent Sustainable Development Goals (SDGs) 4 and 8 also focused on the skill aspects. The recent Covid-19 pandemic has impacted the lowskilled workers across the globe (ILO, 2021).

There are a plethora of studies that defined the term skill in different contexts. Skill is defined as "the learned ability to bring about pre-determined results with maximum certainty; often with the minimum outlay of time or energy or both" (Knapp, 1963). Historically it is referred as to manual craft workers and technologists (Ainley, 1993; Keep and Mayhew, 1999). Skill refers to the knowledge gained through education and experience and encompasses trade and craft skills through apprenticeship, as well as high level performance in a variety of fields, including professional, practice, the arts, and athletics (Breivik, 2016). According to the International Classification of Occupation (ISCO) skill is defined as the ability to carry out the tasks and duties of a given job. Further, there are two dimensions of the skill- skill level and skill specialization to classify occupations into groups. Even OECD Future of Education and Skills 2030 referred to skills "as the ability and capacity to carry out processes and to be able to use one's knowledge in a responsible way to achieve a goal". The World Employment Report (1998) defines the term skill as an acquired and practice ability, or qualification needed to perform a job or certain task completely. It is a multifaceted term since most of the jobs involve a combination of skills which can range from physical abilities to interpersonal or cognitive ones. Thus, the definition or meaning of skill has been varying in both spatial and intertemporal aspects but still, no exact or universal definition of skill is there.

 In today's world literacy is not restricted to formal educational attainment as it has broadened to the area of skill which comprises vocational skills, technical skills, digital skills, technical know-how, and other real-world knowledge application which are now in demand. Knowledge and Skill are becoming the decisive factors in the social development of any country. Literature suggests that having a demographic dividend without any policy framework is itself a serious challenge for the policymakers in the country. Skills development is one of most complex sub-sector to structure and administer in the education sector, as it breaks across organizational boundaries, serving clients with various delivery mechanisms involving dynamic market characteristics (Asian Development Bank 2008).

 In India, the concept of skill development came into existence in 1956 in the first Industrial Policy which stressed formal Technical and Vocational Training Education and Training (TVET) with institutions designed for it. In 1961, the Apprenticeship act was enacted to provide practical training to qualified people and promote a new skilled labour force. There after Kothari Commission was appointed to develop a policy framework for the education system in India. First Industrial Training Institute was set in 1969 by the Ministry of Labour & Employment, Government of India, and later on in 1987, the All India Council of Technical Education (AICTE) as the regulator of technical institutions in the country. With the 1990s reforms, significant sectoral employment shifts were observed with the IT and service sectors booming. Thus keeping the paradigm shift National Skill and Development Corporation was set up in 2008 with the first National Policy on Skill Development in 2009 to enhance the public-private partnership in skill development. National Skill Development Corporation (NSDC) is a not for profit public limited company incorporated on July 31, 2008 under section 25 of the Companies Act, 1956. Its aims to promote skill development by catalyzing creation of large, quality and for-profit vocational institutions. This initiative was undertaken in consensus with the state governments, enterprise owners, experts, and academia to build capacity in the course curricula, competency standards, learning materials, and assessment standards in the training process. Despite the previous efforts, still a huge skill mismatch existed which created a demand-supply mismatch. Even the study of Mehrotra (2014) also defined the employment challenges as, "India's demographic profile is changing: a sizeable and growing proportion of its total population is in the working age group, which is a window of opportunity for the country. However, the numbers are not backed by necessary skills. Over half of the country's workforce does not have primary education, and a miniscule fraction has any formal vocational education and training. The contemporary focus on skill development in India is aimed at bridging this gap and skills mismatch."

 In India, with the growing population and stagnant productivity, it becomes essential to study skill development and jobless growth phenomenon for various reasons. First of all, due to the increasing bulge of the young population in the recent decades, this is often called as demographic dividend phenomenon. Secondly due to the segmented labour market structure, where a majority of the labour force is engaged in informal work activities including the self-employed. Despite of the success of the economic reforms post 1990s, there has been slow growth in the employment generation in private sector (in 2000s) which was termed as the period of "jobless growth". This has had substantial implications in the labour market, since the newest entrants which primarily comprise of youth have ended up working in the informal sector , despite of poor salaries and no social security. Over the years efforts have been taken for the expansion of primary and secondary education particularly in rural India, but still constraints continue to exist in educational and training opportunities. The 11th Fiveyear plan aimed at generating new employment opportunities with a reduction in overall unemployment. Post-2012 it was expected that total employment would increase but India saw a decline of 9 million jobs by the end of 2017-18. Agriculture sector saw a major decline of 4.5 million per annum employment with share of the agriculture and allied activities falling to 44 percent.

Even at global level in 2000, International Labor Organisation coined the term "NEET" referring to "Young people Not in Employment, Education or Training'. One out of every five young individuals in the world falls into the category of NEET, with women accounting for two thirds of all NEETs. Countries such as India, Saudi Arabia, and Ethiopia have the largest disparities between young men and women. Though statistics in India show the increased participation of women in education but it failed to translate to a decrease in the number of NEETs. Thus, persisting high unemployment and a rise in the gap between the employee and the market demand for skills leads to economic tension.

Recently, the Indian government has implemented significant legislative and institutional adjustments to encourage the development of skill. It is quite interesting to see how skill development system has evolved in India with distinct dynamics between the private, government and training institutes. In 2014, the Government of India established Ministry of Skill Development and Entrepreneurship with Skill India Mission. Under this, flagship sectoral Skill Councils were established to identify the training programs. Other than this several other schemes were developed such as Pradhan Mantri Kaushal Vikas Yojana, Skill Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP), Udaan, Standards Training Assessment and Reward Scheme (STAR), Polytechnic Schemes, Rozgar Mela, Craftsmen Training Schemes, etc. to provide skill to the youth and supplement their employability. The Government of India is in a continuous effort to synchronize the efforts of the State Governments and private stakeholders to develop an ecosystem for entrepreneurship and capacity building. The primary thrust has been towards two distinct issues of the skill market- under-provision and the absence of quality provision. Thus the Ministry of Skill Development and Entrepreneurship (MSDE) is in a continuous effort to facilitate enrolment in long-term courses along with short-term training for the youth entering the job market.

Despite the various efforts and initiatives by the government, a long journey awaits to make every youth of the country adequately skilled, but still, a huge mismatch exists. The major reason behind this could be the presence of informality in the economy. It is estimated that almost 91 percent of the workforce is engaged in the informal sector which generally employs a workforce with low skill and lower wages without any proper training. Though the literature suggests with technical education and training the probability of getting higher salaries or remuneration increases, informality in the economy doesn't incentivise such initiatives. Further, mere 4.69 percent of the total workforce in the country is formally trained which is quite low in contrary to the countries such as Germany (75%) and South Korea (96%). In terms of labour demand and supply there is a case of skill mismatch due to technological progress, rapid development of Information and Communication Technology (ICT) which are demanding workers to have more of cognitive skills over physical ones (OECD, 1997). This transition is termed as Fourth Industrial Revolution, popularly termed Industry 4.0 which comprises a wide range of technological advances in the global market ranging from bigdata analytics to industrial automation. With the advent of Industry 4.0 (Fourth Industrial Revolution) the provisioning of employment and skilling is a major challenge not only in India but also across the globe. This will transform the traditional production processes into digital ones offering flexibility to the industries to leverage innovation with automation. Thus, the adoption of such a revolution will eliminate the lower-skilled jobs with increased productivity. This can even result in the movement of value-adding operations to the developed nations as the developing ones may have a scarcity of required skills.

Therefore, a skill-centered education system needs to be developed and coordinated well with the demand and supply of geographies, industries, and markets. These initiatives should be more concentrated on the lagged/backward areas where there is an abundance of the idle labour force. Apart from this, the institutional and financial frameworks must provide a reliable bridge between the world of learning and its practical applicability in order to make the training programs relevant. The four major stakeholders-businesses, labour, government, and training providers must work at the same scale in synchronization to make the efforts productive and fruitful. In India, skill development is dependent on government funding or public private partnership. It is often regarded as a non-scalable model and under-invested. There is a general reluctance among the masses towards fee based models as the majority of the people are averse to paying fees for training modules. When it comes to loans for skill development activities, it is likewise seen as a high-risk activity due to the low return on investment. Skill-based employment prospects are looked at with low dignity providing low wages and salaries. Along with this most of the population is associated with the unorganized sector so skilling and convincing such section of the population about occupational standards and job roles becomes chall-enging. The overall focus should be drawn on encouraging international mobility both within and across the countries to become the "skill capital" of the world.

(Balakrushna Padhi is an Assistant Professor in the Department of Economics and Finance at BITS Pilani, Rajasthan Campus & Himja is a doctoral student in Economics in the Department of Economics and Finance at BITS Pilani, Rajasthan)

Views are personal.