Feature / Columns Magazine | Apr 17, 2010

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No Skills, Only Potential
India will soon have the largest population of youth in the world. But only a fraction of them
will be employable.
Prof Dr Debashish Sengupta

I ndian companies must take note of the fact that our economy is no longer a predominantly
agrarian one. Agriculture’s contribution to the rural GDP has fallen to 41.6% while the share
of industry and services has risen to 58.4%. India’s leap into the 21st Century service
economy is both a blessing and a challenge. It’s a blessing because it creates a lot of job
opportunities, especially for those at the bottom of the employment value-chain. It’s a
challenge because we do not seem to have enough people who are equipped to do these jobs.

According to the Federation of Indian Chambers of Commerce and Industry, India churns out
around 350,000 engineers and 2.5 million university graduates annually

Countries with
higher and better
levels of skills
. However, at any given point in time, about 5 million graduates
adjust more
remain unemployable because most of them are unskilled.
effectively to
challenges and
A Mckinsey Global Institute survey reveals that multinationals
opportunities of
find only 25% of Indian engineers employable. Similarly,
globalisation.
according to a New York Times report, only one in four
engineering graduates in India is employable, based on technical
skills, English fluency, teamwork and presentation skills. This
kind of shortage is evident in other streams as well. If the trend continues, the National
Association of Software and Service Companies (Nasscom) projects a shortage of 500,000
knowledge workers by 2010; the BPO service sector alone will need 350,000 workers by
2010.

Essentially, this shortage represents a severe skill gap and highlights the significance of using
training and development (T&D) as an intervention in a major way. Skills and knowledge are
the driving forces of economic growth and social development in any country

. They have become even more important given the increasing

pace of globalisation. Countries with higher and better levels of
Most non-IT skills adjust more effectively to the challenges and opportunities
Indian firms of globalisation. As India moves progressively towards
consider training becoming a knowledge economy, it is important for the 11th
as a bonus for the Five Year Plan to focus on advancement of skills.
better performers.
In contrast, in the A Yawning Gap
US, it is treated
as a skill According to India’s demographic profile in 2002, there were
management 325 million (roughly 25% of the population) who were in the
function. age group of 20-35 years, much higher than China, which had
around 308 million (21% of the population) in the same age
group. By the year 2020, India will have the largest population
of youth in the world. This is phenomenal, as it represents a large working population.

By comparison, some developed economies, such as France, will have only 11 million
people in the age group of 20-35 years by the year 2025. Despite this, there is a huge concern
over the efficacy of this large pool of young people in India. This concern is fuelled by
speculation over wide skill gaps both in quantitative as well as qualitative terms.

According to the National Sample Survey (61st round), only about 2% of people between the
age group of 15-29 years have received formal vocational training. Those who received non-
formal vocational training made up just 8%. This indicates that very few young persons
actually start working with some kind of formal vocational training. This proportion of
trained youth is one of the lowest in the world. The corresponding figures for industrialised
countries are much higher, varying between 60-96% of youth in the age group of 20-24
years.
Compared to the age group of 5-14 years, educational institution attendance rates drop by
nearly half in the age group of 15-19 years and by 86% after the age of 15 years.
Subsequently, labour force participation rates rise sharply after the age of 14 years, and reach
close to 100% at the age group of 25–29 years. This means that a large chunk of the working
population does not have proper skills.

An Ignored Imperative

It is clear that skill development has been largely ignored in our country and is one of its
major needs. India’s workforce will be younger than the workforces in many global
economies but skill development is critical if we are to take advantage of this demographic
edge.

It is expected that the ageing-economy phenomenon will globally create a skilled manpower
shortage of approximately 56.5 million by 2020. If India can get its skill development
strategy right, then it could have a skilled manpower surplus of approximately 47 million.
This means that in the next decade, India has the potential to become a global reservoir of
skilled manpower, provided it accords high priority to skill development.

Bridging The Gap

But on whom does the onus of skill development rest? Obviously, the government. The
government has been increasing its investments in education and training and has introduced
several provisions and reforms for improvements in its 11th Five Year Plan. However, given
the enormity of the skill-gap being felt in various sectors and at various levels, government
intervention alone does not appear to be enough.

To effectively bridge the huge skill-gap that exists in our country, some T&D interventions
are necessary. They could take the form of: Projects involving public–private
partnerships: Public-private partnerships (PPP) not only generate finances on a large scale
but also provide policy, resource and infrastructure support for initiatives to impart skills
training to the masses. Such projects help create a conducive environment for upscaling
training.

The private sector has lent its support for the establishment of the National Skill
Development Corporation (NSDC) by buying a 51% stake in it. With its capital base of Rs
10 crore, NSDC will stimulate and coordinate initiatives in the skill development sector.

The corporation’s mission, objectives and action plan will be guided by a national policy on
skill development. It will aim to improve core employability skills and competency
standards, thereby creating a common platform for collaboration among private sector
employers, training providers and the labour force. The government is also planning to set up
a fully owned trust, the National Skill Development Fund, with a seed capital of Rs 1,000
crore. Projects involving corporate–academic partnerships: Industry and academia are the
two wheels of the economic cart. If academia is the warehouse of budding talent, industry
represents the talent demand and realisation. They should complement each other. On the
one hand, industry is aware of critical talent-development areas while academia has large
intellectual and knowledge resources at its disposal to cater to such needs. Here are some
recent examples:

• Accenture, the IT giant and Indira Gandhi National Open University (IGNOU)
recently joined hands to develop a diploma programme for outsourcing professionals.
IGNOU’s extensive network will enable this programme to reach millions of students
across the country, improving their understanding of a range of BPO services and
upgrading their personal computing and communication skills.
• HDFC Standard Life, a private life insurance provider, and Manipal Education
recently joined hands to launch First Advantage, a three-month certificate programme
in insurance and management. The curriculum has been developed in line with HDFC
Standard Life’s eight-step structured sales process known as Disha. HDFC Bank has
also teamed up with leading business schools to introduce a certification programme
in retail banking.
• Bharat Electronics, specialising in radar and naval systems, has collaborations with
top institutes like the Management Development Institute in Gurgaon and the
National Institute for Training in Industrial Engineering in Mumbai to train its
executives.
• IBM has launched Drona, a faculty training programme, to improve the employability
of IT students. Under this initiative, IBM has brought leading independent software
vendors to communicate their requirements to faculty members and other key players
to build crucial business and technology skills.

Projects involving corporate initiatives: The number of training and development

initiatives launched by various Indian companies has increased over the last decade.
However, except for companies in the IT sector, most of them still consider training as a
Human Resources (HR) support function. Training is treated as an incentive or bonus
reserved for better performers.

In contrast, in the United States, training is regarded as important and treated as a skill-
management function. Employees are considered as assets and are trained by their
organisations as a part of their growth strategy.

Such strategies have seen training departments growing into corporate universities that are
capable of handling the training requirements of 30,000 to 100,000 employees. McDonald’s
Hamburger University, founded by Fred Turner and Ray Kroc, and Walt Disney’s University
of Disneyland and Disney Institute are some examples.

Infosys Technologies is one of the few Indian companies to take the employee training and
development initiative to another level. Recently, the company’s Global Education Centre
(GEC) was inaugurated by Sonia Gandhi at Mysore. Built at an estimated cost of Rs 2,055
crore, the centre can train 14,000 Infosians at a time. The campus, spread over an area of 337
acres, boasts of 147 training rooms, 485 faculty rooms, 42 conference rooms and two
libraries, which can house 1.4 lakh books. It also has seven food courts, a three-screen
multiplex, a 1,056-seat auditorium and two helipads.

Despite the downturn, the Indian economy continues to grow, and amidst global layoffs, less
than 16% of companies in India considered retrenchment. More than 60% continued hiring.
India’s national income grew by 6.7% this fiscal, making it the second-fastest growing
economy in the world. However, bridging the skill-gap will be critical to take our economy
to the next level of growth and robustness.

Prof Dr Debashish Sengupta, Chairperson, HR Area, Alliance Business School, Bangalore

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