Monday, May 12, 2008

Bridging the skill gap through PPPs - Mohandas Pai

Bridging the skill gap through PPPs

At a time when India has the best growth prospects in its history,we are facing a crisis of immeasurable magnitude on the HR front.
INDIA has been growing at 9% per annum for the last four years and all indications are that the growth rate will be in the range of 7-9% over the next decade. At this rate, India’s economy will double in the next 10 years. We have seen per capita income grow by 7.2% in real terms, primarily driven by economic growth and a reduced growth rate of 1.6% in population over the last four years. This high growth rate has created an enormous number of jobs to the extent that India today faces a shortage of skilled people for the jobs being created. India has around 450 universities and 18,000 colleges with 11 million graduates in our colleges. India’s enrolment rate in higher education in the age group of 18-24 years is just 11% as against the emerging markets’ average of 25% and an average of 50% plus in developed markets. A very large number of students are studying in the vernacular medium, where the syllabus is totally out of touch with the demands of the job market. While we have a lower number of youngsters in colleges, which is itself a great tragedy, we are compounding that by creating a large number of so-called graduates whose skill levels and capabilities are totally out of sync with what the job market requires, creating a major human resource challenge.

There is also a shortage of faculty, around 30%, in engineering colleges today. So, at a time when you need people for growth, there is a shortage of faculty to create next generation that is fit for the marketplace. A view of the macro-data will provide an idea of the immensity of the problem. Today, India has about 6-6.5 crore people in the formal sector, meaning people who are on a payroll. This includes about two crore employees in government and para-government organisations across the country and the remaining in the public and private sectors.

Government figures of employment do not show the true picture since data collection is outdated and outmoded. If we double the economy in the next 10 years, we can safely assume that we need an additional six crore people in the formal sector after making room for people who will retire, and also for improvements in productivity. In effect, by 2028, India should have around 20 crore people employed in the formal sector as against 6-6.5 crore today. If we grow at the current rate, about 20 crore additional jobs may be created in the next 20 years. The education system is clearly inadequate to meet such demand. A bigger tragedy awaits us in the skilled labour area. India has a broken-down system for skill development, viz., vocational training institutions, ITIs, etc., which are not producing skilled people of the required calibre.

Therefore, there is a tremendous shortage in India of carpenters, plumbers, electricians, masons, fitters, welders, drivers and other skilled people who form the backbone of any economy. The human resources pyramid is getting inverted with more investment going into the top end. This has created a crisis of unimaginable proportions and the industry has ended up paying higher wages and is scrambling for talent. A news report recently said that the garment industry in Tamil Nadu is looking to import labour from Sri Lanka and the cashew industry in Kerala is running out of labour and shifting to other places. Look at the building industry. I would reckon that all over India, a billion square feet are currently under construction. A million square feet will provide jobs for 2,000 people. So, about 20 lakh people would be required to construct the billion square feet that India is currently building. Across the country, building sites are slipping behind schedule — very often by 3-6 months. At Infosys itself, we are building around 10 million square feet and our projects are running behind schedule by up to six months due to the shortage of labour, including unskilled labour. A recent report said that a major real estate company in northern India wants to import 20,000 skilled labourers from the Middle East to work on their projects in India. Remember, this is at a stage when India is still at a GDP of about $1.2 trillion, which may double in the next 10 years. What has been the positive response from the government? The government has indeed recognised that there is a potential disaster in the offing, much like the disaster in the farming sector. The government is trying to open up the university and higher education systems, but it is getting stung by the fact that policymakers have the mindset of the 1960s, which is based on creating and managing shortages. We need the higher education sector to be accorded No. 1 priority for India. We need to ensure that every youngster in the age group of 18-24 gets the right college education.

The state has to implement this. In the fiscal 2007 budget, if you look at the higher education numbers, the government was unable to spend the money budgeted: Rs 3,900 crore was budgeted and only Rs 1,900 crore was spent. In 2008, a higher allocation has been made.

Instead of creating central universities and more IITs and IIMs, the government should come out with a plan to create a national scholarship programme giving about two million scholarships of Rs 20,000 each, which will amount to only about Rs 4,000 crore, to young people across the country. This will create a demand push for higher education and also ensure that students are empowered to choose the institutions they desire. At the same time, we need to have a liberal policy in place to encourage more institutions and the best approach is to go for brownfield expansion rather than greenfield expansion. Positive decisions need to be taken to say that higher educational institutions that have been in existence for more than 10 years can automatically double their capacity in the next three years. In higher education, as in other sectors, management is critical. To set up new institutions and bring in a new management team take time and faculty are just not available, whereas brownfield expansion will do the trick.

The finance minister has spoken about skill development in the Union Budget and the Planning Commission has sought a national skill mission group to be set up with around Rs 35,000 crore of investment proposed. However, the allocation has been very meagre. The government needs to enter into a public-private partnership (PPP) on an emergency mode to bridge the skills gap. Companies in the private sector are also stepping in to ensure that the skill development system is ramped up to a very high level. At a time when India is facing the best growth prospects in its history, we are facing a crisis of immeasurable magnitude on the HR front. A leading economist wrote in a major Indian newspaper that India could face full employment in the next five years. Let us wake up to this challenge and look it squarely in the face.

The author is member of board & director HR, Infosys Technologies

Source : ET 120508

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