Demographic Dividend vis--vis Skill Gap Business Opportunity for Tertiary

Players in Bridging the Skill Gap

______________________________________________________________________________

Prof. Rajeshwari Patil

ASMs Institute of Business management And Research, Chinchwad
Rajvpatil1980@gmail.com
9860098150

________________________________________ ____________________________________________________

`India would need to skill up 500 million people by 2022, but its Current capacity for skill
development is only 3.1 million. An objective that can be achieved only with a joint venture of the
Primary, secondary and tertiary sector.

1.1 Background
Skill and Knowledge act as catalysts for economic growth and social development of any country.
To continue the current growth at 8% to 9%, the secondary and tertiary sector in India needs to
grow at 10 to 11%. Assuming that agricultural growth remains constant at 4%, the agricultural
workforce will migrate to secondary and tertiary sector. This implies that there will be gap in
skills of the migrated workforce.
By 2022, India is expected to be home to a skilled workforce of 500 million. About 12 million
persons are expected to join the workforce every year. This talent pool needs to be adequately
skilled to drive the economic growth.

The gap between requirement vis--vis the current capacity is significant and requires action on
multiple front. To fulfill Indias growing need for skilled manpower across sectors and narrow the
existing gap between the demand and supply of skills, the Government of India targets imparting
nine or ten technical skills, including retail and hospitality, to 500 million citizens over the next 10
years.
India has always faced serious challenges in producing sufficient skilled technicians. The strong
economic growth over the last decade and the consequent increase in demand for such skills has
further increased the demand for such skill providers. The key problem in the area of vocational
training is that the aspirants for such training lack the finance to undertake such courses. The
organized financial system also generally does not extend such funding due to the high transaction
cost for such small loans and the lack of bankable collateral. Currently, prospective employers are
coming forward to sponsor such courses, often through in-house training facilities, backed by job

guarantees at the end of the training. As the scale of such training increases, this sector is likely to
see rapid growth.
1.2 Current Structure and supply of education and Skill Development system in India.
1.2.1 Current Structure
The

following

is

the

structure

and

skill

development

sector

in

India.

Source: the skill development landscape in India and implementing quality skills training (ficci)
1.2.2 Current Supply
The capacity of the education and skill development systems is as shown below:
Category
Sub-Category
Enrolment
School Education
Pre-Primary Students
5,264,053
Primary (Class I - V)
132,048,727
Secondary (Class VI - VIII)
52,195,171
High School (Class IX - X)
24,971,520
Higher Secondary (Class XI - 13,414,499
XII)
Sub-Total
227,893,970
Vocational Training
Vocational Training - ITI/ITC 1,062,524
Higher Education
Ph. D / D. Sc/ D. Phil
36,019
MA
481,521
MSc
230,247

MCom
BA/BA (Hons).
B.Sc.
B.Com
BE/ B Arch
Medicine, Dentistry, Nursing,
etc.
B.Ed
Enrolment in Open
Universities
Polytechnic Institutes
Others
Sub-Total

156,714
3,727,727
1,579,355
1,455,457
1,668,228
305,629
244,825
773,917
690,410
2,973,517
14,323,566

While the school education sector is about 227 million in enrolment, the combined enrolment in
higher education and vocational training is about 15.3 million. By limiting this to the
technically and vocationally qualified and skilled workforce, primarily comprising of ITI/ITC
(1 million), BE (1.7 million), Polytechnics (0.7 million), we can observe that the current pool of
skilled talent is around 3.4 million.
1.3 Projected Demand and Demand Supply Gap
1.3.1. Projected Demand
Year
GDP Growth Agriculture
Industry
Services
Total
rate
2007-08
Actual
51
20
29
100
2011-12
9
47
22
31
100
7
47
21
31
100
2016-17
9
43
23
34
100
7
44
22
33
100
2021-22
7-9
41
23
36
100
Source The challenge of employment in India-2009 and ImaCS analysis
In such scenario large portion of the agricultural workforce would migrate to secondary and
tertiary sector. However the skill set of the agricultural sector are not suitable to the
manufacturing and service sector. This gap thus created due to the shrinking employment in
agriculture sector necessitates skill development.
2.1 The efforts till date
The Government of India targets imparting skills to 500 million citizens over the next 10 years.
With an aim to fulfill Indias growing need for skilled manpower across sectors and narrow the
existing gap between the demand and supply of skills, National Skill Development Corporation
was set up as part of a national skill development mission. It aims at training 150 million by 2022
the government set up. NSDC is a public-private partnership, 49% owned by the Finance Ministry

and the remaining 51% held by industry bodies such as the CII, NASSCOM, FICCI and
Assocham. NSDC enters into a JV with leading players for 10-15 years. The private partners
provide equity and NSDC provides loans at a concessional 6- 7.5% rate with a tax holiday for the
initial period of 3-5 years. Training is in 10 technical skill-sets including retail and hospitality.

Key Areas of Vocational & Technical Training

Source: Anand Rathi Research

The course fee for technical courses ranges from `3,000 to `24,000.
2.2 Perspective: Vocational / Technical Skill Development
The key driving factors behind vocational / technical skill development

Demand for skilled workforce increasing with growth in service sector

Inefficient public education system
Lacking employability skills based education system

There exist multiple challenges when it comes to vocational/technical skill development in India,
few critical are enlisted below.

Lack of financial institutions support

Lack of quality trainers
Lack of equipments & machinery for training

There are multiple formal and informal channels in play in skill development. When it comes to
technical or vocational training its predominantly dominated by informal channels and in formal
channels by in-house training in corporate sector

Channels of Skill Development

Source: Anand Rathi Research

3.3 Rationale for focus on tertiary players

In India the education system is primarily dominated by three types of players; government,
private aided and private unaided. Formal education in India is on a non-profit basis and thus
driven by primarily the government and secondarily the private aided organizations. There are a
few private players delivering formal education but the right to education bill will make it
unattractive for private sector to invest. This Act provides the right to all children between the
ages of six and 14 years to have free and compulsory elementary education (standards I to VIII),
in a neighborhood school. Under the Act, private schools providing elementary education are
required to provide free and compulsory elementary education to at least 25% of students from the
weaker section and disadvantaged groups in the neighborhood. If the school also offers pre-school
education, then the reservation would be applicable for such levels as well. This coupled with gulf
between formal education and the markets skill requirements has opened up a lucrative market
for private players.
Spread of Students across different players based on type of training

Source: Anand Rathi Research

The corporate sector requirement primarily is for technical and vocational training and
interestingly 55% of students pursuing technical education and 47% of students pursuing
vocational training are enrolled with private unaided institutions. These are the only segments
where a majority of students prefer private education.
4 .1Research Problem
Manufacturing & services sector will require 250 million skilled people by 2022. The gap
between requirement and capacity is huge. While government and aided players focus on
elementary education it is up to private players to help fill up the gap for skilled workers. The
research aims to study the challenges, opportunities, remediation models of private players and
identify opportunities for improvement.
4.2 Research Statement
The role of tertiary sector is important to reduce the impact of risk on the students, institute and
industry and to bridge the gap.

4.3 Objectives
Primary Objective
To study the challenges, opportunities, remediation models of private players and identify
opportunities for improvement
Secondary Objective
1. To assess the gap between the current skill and expected skills
2. To study the current educational model of the Academic Institution and assess the
compatibility of the curriculum with industry requirement.

5.1 Key Findings

A survey was conducted to identify the expectation of the industries
from students graduating from B- schools and to identify the
expectation of these students from the companies.
Some of the key findings are:

67%
Majority of the student respondents
look for an Opportunity for
growth/advancement.

Preference: An attempt was made to identify what matter the most to The companies that were
the students when they take up a job.
approached, however found that
expectation of the fresher are do
The preference that the respondents focus while selecting a company not meet the reality.
for their job is opportunity for growth and advancement. This was
followed by team work (57%), learning from the job (48%),
Enjoyable work task (40%), helping other (36%) and job security
(30%).
The least important values were:
Independence on the job
Clear expectations and room for clarity
Enjoyable colleagues
Regular Travel
Working alone
Low pressure job Service to causes

On the contrary companies while hiring look at the following

Flexibility in working hours,
Self-discipline,
Aptitude and willingness to learn,
Commitment and dedication,
Self-motivated.
Employers expect their employees to
put in extra working hours if
required, they believe that flexible
working hours increases productive
and revenue. It is used as major
retention tool.

Interest: Student Respondents were asked to identify work area they

would be most interested. While the companies were asked their
opinions about the skills required to perform such work.

80%

The students are most interested in performing activities that

involve problem solving and those activities that are in way linked
to the organization goals and objectivities. This Gen y is result
Of the student respondents were
oriented and what want to be recognized for their contribution to the most interested in Activities
large goals
involving working with people,
influencing, persuading,
performing, leading, or managing
for organizational goals or
economic gain.
According to 88% of the companies
interviewed were of the opinion that
freshers lacks the required skills to
perform such activities.

Where

Activities involving athletic or mechanical ability;

preference to work outdoors or with objects,
machines, tools, plants or animals.
learning, investigating, analyzing, evaluating, or
problem solving
preference for working in unstructured situations
using imagination and creativity
working with people to enlighten, inform, help, train,
or cure; being skilled with words
working with people, influencing, persuading,
performing, leading, or managing for organizational
goals or economic gain
Work with data, clerical or numerical ability, carrying
out tasks in detail, or following through on others'
instructions.

According to the HR, the skills that are in great demand are effective communication skills,
analytical skills, problem solving, leadership, team management global exposure,
empowerment and ownership.

However the gap that is identified on the scale of 5.

1
2
3
4
5
6
7
8
9
10
11

Communication skills
Verbal Skills
Presentation skills

Listening Skills
Written Skills

6.1The Final word..

The increasing skills gap in India has seen a lot

of activity in the skill development space over
People management skills
Multitasking
the last few years. While the size and scale of
Proficiency with computers Excel analysis
gaps calls for a restructuring of the formal
Email Skills
education system, the numbers with respect to
Analytic skills
the availability and the required capacity to skill
en-masse might not be catered to at the required rate by just formal education alone. This obvious
gap has attracted many private players who are vying to capitalize on this newfound business
opportunity - a National Treasure that is waiting to be explored and nurtured by the entrepreneurs
in the non-formal skilling sector that has emerged in the last couple of years.
Team work and collaboration

Estimating the size of a nascent industry can be a thankless, but an exciting exercise. People
Matters estimates of the skilling industry are based on economic realities, as expressed by
industry participants, and by the larger macro-economic requirements. If NSDCs 36 approved
projects are slated to skill 55 million over the next 10 years with an estimated turnover of Rs.

78,000 crore, then the projected challenge of skilling 500 million could create an approximate
industry size of $100 billion. Such a massive opportunity is enough to spur the level of activity
that the industry is witnessing with an increasing influx of players of all sizes and backgrounds
entering this space.
While players in the non-formal skilling industry are many and increasing, and each has identified
its specialized area of expertise, this story probes further to understand if these service providers
have been able to identify their place in the larger context of the industry.

Some of the findings based on the secondary and primary research are as follows for the tertiary
sector.
Quality, Cost & Scale

To capitalize on the opportunity, skilling companies must get the cost,

quality and scale equation right. The dropout rate is increasing formal
education is increasing because of lack of easy finance.

Customer

Skilling companies are to identify who is the consumer of this industry is it the employer or the student. Both tend to benefit. While the student
becomes employable, the companies can find the right talent.

Need for financial 70% of the target population belonging to rural and tribal areas has no
infrastructure
capacity to pay. While skill development organizations have to create
shorter and affordable programs that will equip candidates with the right
skill-set for a job, the industry also needs financial infrastructure in the
form of banks and other financial institutions being open to financing
vocational education.
Policy Issues

no plan or roadmap for integrating vocational training into the formal

graduation system and for students from the vocational system to enter
into the formal system

Some key challenges that the private sector will face in skill development training are:
Sourcing of students

Identifying the target group to provide training and skills required to

work in a specific sector remains a key challenge for the players entering
skill development training in India.

Absence of defined
standards for
training

The absence of defined curricula and certification accepted by the

industry is another key challenge for the players. However, this, we
believe, can be addressed through the establishment of sector skill
councils by NSDC.

Establishing long
term tie-ups with
corporate

Players will need to enter into long term tie-ups with corporate to ensure
placement of their students, recovery of their fees, brand building and to
ensure scalability of operations.

High churn ratio

Players have to counter the high churn ratio in some sectors such as auto
and construction, where the fees are recovered from the students over a
period of time, after their placement. A high churn ratio can impact the
profitability of players

There are several business models that are followed.

IFBI Established by NIIT in association with ICICI BANK offers an unbeatable combination for
the student, and the industry. FBI's offerings are designed in this context of modern-day Banking,
Insurance and Financial Services by developing competencies on 4 dimensions - domain,
technology, application and customer-service. The key focus area of IFBI is to address
the manpower challenges of multi-skilled and trained professionals in BFSI sector. IFBI is
actively engaged in re-skilling existing professionals in the Financial Services sector - who are
being overwhelmed by recent economy reforms, technology advancements and changes in attitude
& approach in this sector
The Model
IFBI program have come not just from established texts and literature, but have been
distilled from the real-life experiences of practicing bankers and financial experts who are
part of the content-development team.
The methodology of the teaching-learning process includes Case-studies, Project-work,
Self-paced e- learning, Simulation exercises, Role-plays, Information Search and Analysis
(ISAS) assignments, collaborative group activities and supervised Internship (applicable
for select programs).
The program develops essential professional attitudes like problem-solving, effective
communication, self-learning, team work, and deadline orientation, multi-tasking, cross
functional capabilities, and - naturally - application orientation and IT usage.
IFBI has launched over 19,000 careers in leading organizations of the Banking and Financial
Services Industry. Today, IFBI graduates are working in leading organizations ICICI Bank, Axis

Bank, HDFC Bank, Kotak Mahindra Bank, Dhanlakshmi Bank, HSBS Bank, ICICI Lombard,
ICICI Prudential, Laxmi Vilas Bank, Wealth Advisors Inc, Karvy, Fullerton Securities, ICICI
Securities, HDFC Securities, Bajaj Capital, Deutsche Bank, ING Life and many more.
Creating a model like the one mentioned can help the business sustain in the long term

Reference:
1.
2.
3.
4.
5.

An Experiment in employability enchancement- Merit track

Anand Rathi Indian Education
India's Skilling Industry: In Need of Synchrony people matters
The India Skill Gap Richard Morris
The Skill Development landscape in india and implementing Quality Skills TrainingFICCI & iMaCS
6. Training for skills in crisis a critique and some recommendations
TJ training
journal