A Policy Roadmap for Skilling Indian Youth

In India, 77% of workers currently participate in the informal economy and 90 million people will join the country's pool of potential workers in the next decade.

Sounds very optimistic as India heads to 2030, by when it aims to be among the world’s top three economies. It is axiomatic that technology is a great leveller and creates opportunity. Unlike developed nations which have distinct characteristics, the advance of technology will play out differently in developing countries. If applied properly, it will lead to more jobs and better jobs—an approach called ‘Bridgital’.

In this vision of India, digital technology helps people bridge gaps that presently hold them back. This is a Bridgital Nation, and it's achievable within a decade, the World Economic Forum (WEF) predicts in its 2020 report.

Demographic Dividend 

For a country of the size of India which has more than 50% of its population below the age of 25, and more than 65% below the age of 35 — out of a population of over 1.4 billion — it is a humongous force to reckon with. At the same time, it is indeed a challenge for the government to provide them with gainful employment and channelise the vast energy for constructive and positive outcomes both for individual and national growth.

Seen from the perspective of the NDA government’s aim of making India the world’s third largest economy in the next decade, at about $3 trillion, the challenge only gets compounded. While the intentions and aims are laudable, and will reflect in growth in terms of per capita income, that is not an accurate picture of the socio-economic situation on the ground. The huge young population needs to be trained in saleable skills aligned with the changing market dynamics and demands where they could be employed. This, of course, would drive industry growth, and would eventually lead to the overall development of the economy and the society.

The Ground Reality

For the record, the Indian government in its first term set up the Ministry of Skill Development and Entrepreneurship. It underscores the importance the government has given to this very critical sector. As a few years have passed and critical reviews have revealed, the lacunae and desired results far from achievement. What, then, and where did the implementers go wrong?  

While structurally the policy did look great on the drawing board, an important stakeholder — the industry — does not seem to have been involved as much as it should have. Because the raison d’etre of the skill development mission — to train, and provide meaningful and sustainable employment to the industry, which is the end customer — was somewhere amiss.

Let’s take a closer look at the issue. Results of the India Skills Report 2024 indicate that only about 50% of India’s youth with formal education could fulfil the requirements for employment in a variety of fields. So, one needs to revisit, and relook India's approach to skill development and vocational training which is absolutely necessary in the light of this imbalance between educational outputs and industry requirements.

According to the National Sample Survey Organisation Employment-Unemployment Survey (NSSO EUS) 2011-12, only 2.2% of the workforce in India had received formal VET (Vocational Education and Training) as per the Periodic Labour Force Survey (PLFS) data, the percentage of formally vocationally trained individuals decreased from 2.2% (10.43 million) in 2011-12 to 2% (9.14 million) in 2017-18 but rose to 3.7% (21.05 million) in 2022-23. Additionally, as per the National Scholarship Portal (NSP) 2015, only 2.7% of India’s workforce has received formal skill training, compared to 52% in the United States, 80% in Japan, and 96% in South Korea.

Needed: A Rejig 

In fact, in the 2024 budget speech, Finance Minister Nirmala Sitharaman claimed that 14 million individuals were trained under the Skill India Mission, which included up-skilling and re-skilling 5.4 million. But there appears to be a disconnect between the claims of the government and the ground reality.

Further, there is also a stark disparity between these numbers and targets set in the National Policy on Skill Development and Entrepreneurship 2015, which aimed to skill 400 million workers by 2022, which remains unfulfilled. More importantly, 300 million of these workers were to be given Recognition of Prior Learning (RPL) – which was required since over 95% of India’s non-farm workers acquire their skills in the unorganised sector in informal work. But these skills are not certified, hence, not recognised.

Informal learning deserves recognition and certification so that such workers can acquire some dignity in the labour market and certificates could possibly help them make a claim for higher wages. Hence, the National Skill Development Mission (SDM) and National Policy on Skill Development and Entrepreneurship were the government’s response to the very low level of formal vocational training among the Indian workforce. SDM was implemented through schemes such as Pradhan Mantri Kaushal Vikas Yojana (PMKVY), Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDUGKY), and the National Apprenticeship Promotion Scheme (NAPS), to address employability gaps.

In fact, PMKVY has been Skill India Mission’s flagship programme and yet, not only is the training all short term, but the placement rate also shows no improvement over time: placement rate for PMKVY 1.0 (which started in 2015) is 18.4%, PMKVY 2.0 is 23.4%, and PMKVY 3.0 is 10.1%. However, the programme is still being funded — PMKVY 4 is starting this year with a budget outlay of Rs. 1,200 crore, approximately. 

Although these initiatives are seeing positive rates of participation, the real job placements and long-term employment scenario remains blurred and falls short of the desired outcomes.

Consider this. Interestingly, the flagship PMKVY, the official website data claims that 54% of the trainees have been placed through this scheme. Analysis of the actual data shows that of the total 12,454,858 candidates assessed, 11,041,125 candidates were certified, and only 2,451,517 candidates were placed, i.e. only 22.2%.

What Needs To Be Done?

Researchers Santosh Mehrotra and Dr. Harshil Sharma in the The Wire opined that in the light of educated unemployment, lack of takers of skill programmes, low-quality training and abysmal placement rate, there is an urgent need for a comprehensive overhaul of the skill development landscape. Mere rhetoric and inflated statistics will no longer suffice. 

It is imperative that the government prioritises quality over quantity, ensuring that every individual emerges from these programmes truly equipped to contribute meaningfully to the workforce. Anything less would be a disservice to the aspirations of millions seeking a better future through skill development.

Skill policies and schemes have completely failed and need a big overhaul on the lines of successful skill formation models like Swiss and Germanic skill models which are based on duality principles with youth and industry at centre stage. A Right to Apprenticeship to every youth should be an urgent priority, the researchers assert.

Budget Promises

Moreover, the Union Budget 2024-25 outlines an ambitious plan for education, employment and skills development aimed at stimulating economic growth and creating abundant opportunities for India’s youth. The government’s clear objective is to bridge the skills gap, boost employability and ensure that the nation’s young population is well-equipped for the future. The Economic Survey 2023-24 provides two key data points that underscore the government’s renewed emphasis on skilling and employment. 

Shiv Dixit, Assistant Professor, Economics and Public Policy, ISB says, “Skill development of Indian youth which accounts for more than 50% of its population below the age of 25, and more than 65% below the age of 35 of a population of over 1.4 billion, is challenging task for the for the government.  It looks at efficacy and impact of the government’s programmes and schemes till now, why they have not met the desired results, and what needs to be done address this. Also, the government’s renewed focus, especially in Budget 2024 and the allocated funds need to be deployed for positive outcomes.”

Aligning with the Budget’s theme, the Finance Minister introduced five schemes— the Prime Minister’s package—for employment and skilling, with a total allocation of Rs. 2 lakh crore over the next five years. These initiatives are expected to benefit 41 million youth. The current Budget has already allocated Rs. 1.48 lakh crore towards education, employment and skilling, marking a 30 per cent increase from the previous allocation of Rs. 1.13 lakh crore.

One of the five packages features a comprehensive scheme that offers internship opportunities in 500 top companies to 10 million youth over five years. Youth aged 21 to 24, who are neither employed nor engaged in full-time education, will be eligible to apply. The scheme includes a monthly internship allowance of Rs. 5,000 and a one-time assistance of Rs. 6,000. This emphasis is reflected in the increased budgetary allocation for the National Apprenticeship Training Scheme, which has risen from Rs. 420 crore (revised down to Rs. 400 crore) to Rs. 600 crore.

Another initiative is the scheme to upgrade 1,000 Industrial Training Institutes (ITIs) using a hub-and-spoke model, aligning their courses with industry needs to address the skill gap. The plan involves developing 200 hubs and 800 spoke ITIs, with a total investment of Rs. 60,000 crore over five years. The centre will contribute Rs. 30,000 crore, while states Rs. 20,000 crore, and the industry (including CSR funds) Rs. 10,000 crore. 

However, the actual allocation remains relatively low at Rs. 4,520 crore. Take the case of ITI upgrade. The central government plans to spend Rs 30,000 crore over the next five years on ITI upgrades, averaging Rs. 6,000 crore annually. Yet, the Budget has only allocated Rs 1,000 crore for this.

Despite these budgetary limitations, experts remain optimistic about these initiatives, particularly the provision of internships to 10 million youth, which is expected to boost employability.