Sunday, 28 August 2016

India - Skill Development and GDP

India’s Demographics: the Potential Dividend and the Current Drain

According to the 2011 census, the median Indian age was 25.1 years with 65% of the population under the age of 35. This demographic advantage of India affords the nation an opportunity to overtake the global stage with a vengeance, and claim the position of the Golden Bird that we once used to be.  However, the impediment to the achievement of this game-changing aim is simply one, only 2% of the 500 million strong workforce of the country are skilled. This creates acute shortage for sectors that represent almost 75% of the country’s GDP  – services (57%) and manufacturing (16%). Thus with no option left, 53% of the country’s workforce is employed in Agriculture that contributes 19% to the GVA and only 24% of the workforce is employed in services.  The need to skill up to grow more productively and equally has never been more critical.

Education. Where do we do more?

A lot of effort has been put into primary education leading to a net enrolment of 98% in primary schools. But the number of children who are math and reading capable remains extremely low. Only 39% of class 3 children are able to subtract and 47% can read a Class I text. 

Those who manage to stay through schools, with little ability to comprehend the higher levels of education, drop out soon after high school. In fact only 12% of the students graduating from high school make it to colleges. The reducing ratio of institutions of higher learning to those of primary education in the country adds to the competition and thus not all willing get to tool themselves up for the work life. In 2011 there were 447,600 middle schools in the country, 131,215 high schools and 72,046  pre degree / higher secondary schools / junior colleges. For anyone wanting to pursue engineering or architecture there were only 2,894 options and for those attempting to become doctors or nurses only 2,153 institutes existed. No wonder, the unorganised sector remains the one bread earning option for 90% of the youth. The investment into education has and at this rate will continue to reap low or no benefits for the nation at large.

While new institutes of higher learning are being set up in the country, even by the private sector, there needs to be emphasis on providing trained teachers, appropriate infrastructure and adequate awareness to ensure education enables the disciples. In fact a starting point of skill development should be to train teachers in delivery and ensure that students are able to understand and learn in class.

India’s education spend is only 1% of the GDP. As this spend increases in areas such as teacher training, the multiplier effect could be significant, helping the National Skill Development Corporation (NSDC) achieve its aim of training 30% of the 500 million workforce by 2022.

Skill Development: A Fresh Approach for a New Dream?

To ensure that the young Indians are tooled up to becoming corporate India ready, the need of the hour is to bring education and skill development under the same regulatory umbrella and do away with the current structure that has education as the KRA of HRD Ministry and Skill Development that of Labor and Employment ministry and NSDC.  As we grow we will need more manpower, and by 2020 60% of Indian population is expected to form the workforce. It is only if we ensure that basic education is provided to all and then each youngster is given an opportunity to discover and grow in her field of choice that we will have an educated, excited and equipped work force that will generate profit per person befitting a country wanting to grow 10% per annum.   

According to a recent report on India Skills by WheeBox, an assessment test administered to 300,000 candidates indicated that only 37% were corporate employment ready. Confounding! The services sector is expected to grow at a CAGR of over 5% over the next two years with e-commerce alone looking to create at least 150,000 jobs in the next 2 years. The government aims to boost manufacturing so that it can contribute 25% to the country’s GDP by 2025. With these targets and the current skill development scenario, the hunt for talent in the country seems to be a long drawn battle.

A lesson that India can learn from Germany, and together India Inc and the government could implement, is close working partnership of industry and universities. The German Mittlestand (mid cap) companies are entrenched in their local Eco systems from providing training to the young, internships and apprenticeships to local university students and finally providing employment to the skilled they have developed. As a result not only is the German unemployment rate (at 7.8%) lowest in Europe at but also the employee turnover is only 2.7%. If Indian mid-cap could start training college going youth and then employing them, we could see a shift from higher participation in agriculture to manufacturing and services, giving GDP a major boost. Given the 2% mandatory spend on CSR, this will be a self fulfilling prophecy for India Inc while helping the nation to grow more sustainably. It could also reduce the rural to urban migration, aiding development and reducing pressure on the stressed urban infrastructure.

Women and GDP: It's Empowerment by Educating and Employing!

An interesting observation of the 2011 census is the female workforce participation in the country at 26%! While in urban India the female to male worker ratio is 226, in rural India the figure is staggeringly higher at 384. Most of the women are employed in the informal / unorganised sector or are a part of the unpaid workforce! In fact in the most industrialised States of (erstwhile) Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu, the highest female workforce participation in urban areas is 20% in Tamil Nadu which is much lower than the national average. The women worker participation is not only low but at the moment non profitable for the country.

What these numbers don't tell but UNICEF research has shown is that an educated mother is twice as likely to send her children to school. Not only does this lead to literacy and probably higher skill development but considering that every extra year of education enables women to earn 20% more as adults, educating women becomes a no brainer! According to Making it Right report, for 1% of new girls enrolled in schools, India’s GDP could grow by USD 5.5 billion.


Talent recruitment and retention is a challenge that all of corporate India is facing currently. If we take our destiny in our own hands and focus on improvements in education, providing vocational training on site and encouraging women, we could have an ocean of skilled workforce to take us to growth levels unprecedented. We can use our CSR spends, our professional networks and our association with the government to ease this journey for all of us and the nation. A partnership that would see more people more gainfully employed and higher growth rate for the country would also lend stability to the nation which today is trying very hard to maintain composure and tell the world that it too is a main character of the unfolding global story.

As industry participants it is our responsibility to help the cause of skill development in the country or very soon talent acquisition would become a talent scavenger hunt.