BERG Insights Team
India’s transition to a knowledge-based economy requires a new generation of educated and skilled people. Its competitive edge will be determined by its people’s ability to create, share, and use knowledge effectively. A knowledge economy requires India to develop workers – knowledge workers and knowledge technologists – who are flexible and analytical and who can be the driving force for innovation and growth.
To achieve this India needs a flexible education system: basic education to provide the foundation for learning; secondary and tertiary education to develop core capabilities and core technical skills; and further means of achieving lifelong learning. The education system must be attuned to the new global environment by promoting creativity and improving the quality of education and training at all levels.
Countries that have had the most rapid increases in educational attainment, as well as sustained economic growth, have upgraded education sequentially. In a globalized economy, a large pool of skilled workers is indispensable for attracting foreign direct investment.
Developing skilled workers enhances the efficiency and flexibility of the labour market; skills bottlenecks are reduced, skilled workers are more easily absorbed into the economy, and their job mobility is improved. It is crucial to invest in quality secondary and tertiary education and in vocational education and training (VET) if India’s economy is to develop and remain competitive in world markets.
Dealing with constraints
India’s ability to deal with these changing realities is constrained as in few other places. While its population growth rate has declined over many years the labour force is still projected to grow by close to 2 percent or some 7 million or more a year over the next few years.
Much of the economy and much of the population are still rooted in traditional activities and structures. Significant elements such as the cultural, social and political traditions of the country should, of course, be retained and education has a particular role to play in that. But other aspects should change if people are to move out of poverty.
Over half of the labour force is still engaged in rural activities. Although there has been a significant movement away from agriculture this has still left most of the labour force, over 90 percent, working in the informal sector, much of it at low levels of productivity.
For this majority group, access to secondary education and VET is crucial and for most of them secondary education and VET will be the last stage of their formal schooling. An effective school to work transition for these young people, made possible by higher quality secondary and tertiary education and VET, will improve their employment prospects and lifetime earnings.
India lags far behind in imparting skill training as compared to other countries. Only 10% of the total workforce in the country receives skill training. Further, 80% of the entrants into the workforce do not have the opportunity for skill training.
The accelerated economic growth has increased the demand for skilled manpower that has highlighted the shortage of skilled manpower in the country. Employees worldwide state a variety of reasons for their inability to fill jobs, ranging from undesirable geographic locations to candidates looking for more pay than what the employers have been offering. India is among the top countries in which employers are facing difficulty in filling up the jobs.
For India, the difficulty to fill up the jobs is 48%, which was above the global standard of 34% in 2012. The lack of available applicants, shortage of hard skills and shortage of suitable employability, including soft skills, are some of the key reasons in finding a suitable candidate for available jobs in the country.
The Demographic Advantage
As compared to western economies where there is a burden of an ageing population, India has a unique 20–25 years window of opportunity called the “demographic dividend.”
This “demographic dividend” means that as compared to other large developing and developed countries, India has a higher proportion of working age population vis-à-vis its entire population.
In India, both the government sector and the private sector have realized the critical role education plays in building skilled manpower and in turn boosting economic growth.
Some of the recommended steps that the government can take to make skill training fully inclusive and achieve the training targets:
- The government provides substantial support to formal education at the school level. Along with formal education, the next reasonable action, the government can take is to provide financial support to vocational training.
- Women participation in vocational education and training is especially low as compared to men. In order to increase enrolments, the combined efforts with local NGOs and panchayatson informing women and their families on the advantages of vocational education, which may lead to employability, is very important.
- The current vocational education and training facilities can be improved tremendously by setting standards, certifications and guidelines on the syllabi being taught, the teaching faculty and training institutes will lead to a more organized system.
- An option to establish a regional Career and Counselling Window where professional expertise may be provided to explore its own potential and deliver to society in the most proficient manner. The Career and Counselling Window may be developed at a district level with a pool of professionals from the field of psychology and skill planning to support the initiative.
With inputs from The Human Development Unit of World Bank & Knowledge Paper of E&Y.