How Govt Skills Training Programmes Aimed For Wrong Targets & Wasted Public Funds

India’s goal of skilling 400 million people under the National Skills Development Programme 2015 is too large, unnecessary and unattainable, a government-appointed committee has found.

The previous goal of skilling 500 million people, set in 2009 under the National Policy on Skill Development, was also fixed without any basis, the report by the Committee for Rationalization & Optimization of the Functioning of the Sector Skill Councils (SSCs), issued April 25, 2017, said. SSCs are autonomous, industry-led, sector-specific skill builders that ensure skills training meets employer needs.

The government has missed its skills training targets for each except one of the last five years, official data show.

Why ‘Skill India’

About 64% of India’s population is expected to be in the working age group of 15-59 years by 2026, according to Ernst and Young, a professional services consultancy. India is expected to have the largest workforce in the world by 2025, with an estimated 2 billion English-speaking people by the end of 2020.

By the same year, the world is expected to face a shortage of 56.5 million skilled workers, while India is projected to have a surplus of 47 million, Indian government statistics say.

Yet, 30% of India’s youth are neither employed nor in education or training, Bloomberg reported on July 7, 2017. Unless employed gainfully, India’s “demographic dividend” can turn into a socio-economic nightmare.

For instance, 4.69% of India’s workforce is formally skilled, as against 52% in the USA, 68% in the UK, 75% in Germany, 80% in Japan and 96% in South Korea. In fellow emerging economy China, skilled workers account for 24% of the workforce.

This is noteworthy because the largest contributor to India’s economy, the services sector, requires highly-skilled workers. Manufacturing, which the government is seeking to boost through its Make in India initiative, also needs trained workers.

To address this imperative, Prime Minister Narendra Modi launched the Skill India programme on World Youth Skills Day on July 15, 2015, announcing the aim to skill 402 million people by 2022.

The Ministry of Skill Development and Entrepreneurship (MSDE)’s estimate for the number of people who needed skills training was more modest--126.87 million people in 34 sectors across industries by 2022, its Annual Report 2016-17 said. Of these, the top 10 sectors would account for 80% of the total requirement, it was estimated.

Source: Ministry of Skill Development and Entrepreneurship Annual Report 2016-17

Even as India struggles to provide basic skills to millions of potential job-seekers, it needs to address the challenge of automation and prepare to impart skills for jobs where humans will not be replaced by robots or algorithms.

No less than 69% of Indian jobs are susceptible to automation, the labour ministry told the Lok Sabha on March 27, 2017.

Automation is already affecting the manufacturing and engineering sectors; factory jobs are more vulnerable to automation than those in the IT companies, The Economic Times reported on June 28, 2017.

Government steps in

Mindful of the challenge, India issued a National Policy on Skill Development in 2009 with the aim of skilling 500 million people by 2022.

The 2015 National Policy for Skill Development and Entrepreneurship issued subsequently estimated the need to skill 402 million people over the next seven years—to train 104 million fresh entrants and re-skill/up-skill the existing 298 million farm and non-farm sector workforce.

However, the government has been unable to meet its annual targets--set by various ministries and departments--for any but one of the last five years.

Source: National Skill Development Agency; Annual Report 2016-17

NOTE: *Figures upto December 2016; Achievement data for various ministries is not available for 2016-17.

The Ministry of Skill Development and Entrepreneurship (MSDE) achieved 58% of its total skills training target in 2015-16, while the remaining 19 ministries together met 42%, the committee which studied SSCs reported.

Key ministries responsible for sizeable employment generation such as human resources development, textiles, commerce and industry, and tourism have not been allocated the work of skill development, the report found. “Some ministries have been allocated role of ‘employment generation’ which, ipso facto, doesn’t mean that they will do skill development also,” the report said.

The report pointed out numerous shortcomings in India’s vocational education and training systems, including: absence of nation-wide Vocational Education and Training (VET) standards, lack of an integrated on-site apprenticeship training, inadequate industry interface, insufficient financing of the VET system, scarce training capacity, poor quality outcomes, and shortage of qualified trainers.

It found that many ministries imparting skills training are short of infrastructure and qualified trainers, and hence impart substandard training.

SSCs, which are responsible for developing and conducting programmes as well as assessing trainees, were themselves established randomly, the committee found. One of the criteria for establishing an SSC--that a sector have 1 million existing workforce--was itself not strictly followed. For instance, the Media and Entertainment SSC was created despite employing 400,000 people in 2013. The data used by the National Skills Development Council, which oversees SSCs, were based on a study “whose authenticity was difficult to establish,” the report said, adding that setting up of SSCs created “confusion and mess” instead of resolving any issues.

There are about 40 SSCs covering high-growth sectors such as automotives, retail, healthcare, leather and food processing, and informal sectors such as beauty and wellness, security, domestic work and plumbing.

Targets were overblown, loans went unpaid

The committee said SSCs proposed “huge physical targets” of training and certifying institutions and people--both trainees and trainers--on an “arbitrary basis,” without formulating a sectoral labour market information system and sectoral skill development plan.

Fund allocation to SSCs was based on achievement of these targets. Representatives of many SSCs told the committee that these high targets were allocated arbitrarily by the National Skills Development Corporation (NSDC), and SSCs were told to sign on the dotted lines so as to claim funding.

As a result, the quality of training, assessment and certification suffered even as targets were shown to have been achieved, the report noted.

The NSDC was set up in 2008 as a public-private organization to generate skilled manpower. It gave soft loans, equity and grants to private-sector training partners.

Many of its initial loans of around Rs 1,500 crore--nearly equivalent to the cost of setting up an Indian Institute of Technology (Rs 1,748 crore)--were not paid back.

Source: Ministry of Skill Development and Entrepreneurship - Report of the Committee for Rationalization & Optimization of the Functioning of the Sector Skill Councils in its observation

“NSDC and the MSDE have taken cognizance of this fact and are taking actions which are both supporting as well as penalizing to ensure timely repayment,” Manish Kumar, CEO and MD, NSDC, told IndiaSpend. As of June 14, 2017, the total amount overdue to NSDC from its non-performing assets account stood at Rs 58.24 crore, he said.

“NSDC Training Partners service the loan as per the terms of the loan agreement with NSDC. NSDC has a rigorous system for project appraisal and consists of independent due-diligence and multiple levels of approvals by investment committees,” Kumar said. (The NSDC’s complete response to IndiaSpend is here.)

A revised estimate of the incremental human resource requirement during 2017-2022 is 103.4 million across 24 high priority sectors, as per the MSDE’s annual report 2016-17.

Source: Ministry of Skill Development and Entrepreneurship Annual Report 2016-17

The MSDE has also distanced itself from the 500m-by-2020 target.

“The figure of 500 million was a part of the National Skill Development Policy of 2009 which provided for a review after five years,” MSDE told IndiaSpend in a statement. “The policy was duly reviewed and a new policy for skill development and entrepreneurship was launched in 2015, post the formation of the MSDE.”

Kumar added that the 2015 policy identifies the challenge more clearly: the need to skill a huge workforce of which only 4.69% is formally skilled; and gives a clearer break-up--104.62 million fresh entrants by 2022, in addition to 298.25 million existing farm and nonfarm sector workforce. (Read the ministry response to IndiaSpend here.)

Funds lined private pockets

The committee found that vocational trainers and assessing bodies were private entities who utilized government funds, but the youths who enrolled did not get proper training and were not placed. Nor were sector-wise skill needs met.

The National Skill Certification and Monetary Reward Scheme (STAR) launched in 2013 by the NSDC was “very ill conceived” and poorly implemented, and displayed poor placement outcomes, the committee found.

STAR was a reworked version of the Skill Development Initiative Scheme (SDIS) launched in 2007 with an outlay of Rs 2,000 crore. Both functioned in parallel, with the only difference being that the former was implemented by the NSDC, the committee report noted.

Without evaluating STAR, the NSDC launched the Prime Minister Kaushal Vikas Yojana (PMKVY) in July 2015 with a further outlay of Rs 1,500 crore. This “ambitious scheme” too was “badly implemented with very poor employment outcomes,” the report noted.

A programme called Recognition of Prior Learning--under which people with prior learning experience or skills were assessed and certified--was misused. People were certified “after giving 2-3 hours of training” in order to inflate numbers, the report noted.

Without rectifying any of the problems with PMKVY, the government launched ‘PMKVY 2.0’ in July 2016, proclaiming an aim to skill 10 million youth during 2016-2020 and setting aside an outlay of Rs 12,000 crore. The professed aim was to overcome implementation challenges and “make it more effective, transparent and beneficiary oriented,” the ministry said in a reply to the Lok Sabha (lower house of Parliament) on March 15, 2017.

Of the 1.8m people trained under PMKVY during 2015-16, 12.4% received placements; 8.5% of the 1.4 million people trained under STAR were placed, the committee found.

“The unmistaken conclusion is that an amount of Rs 2,500 crore of public funds was spent to benefit the private sector without serving the twin purposes of meeting the exact skill needs of the industry and providing employment to youth at decent wages,” the report stated.

Kumar of NSDC said, however, that low placement figures belie the real employment picture. “The objective of STAR and PMKVY 1.0 Scheme was to encourage skill development of youth by providing monetary rewards for successful completion of training,” he said, “The actual numbers will be many times higher but since training partners were not mandated to report back, only a few have shared placement data…”

He was alluding to the fact that under PMKVY (2015-16) it was not mandatory for NSDC’s training partners to report employment data, while PMKVY (2016-20) made it mandatory.

Some action was taken against irregularities: five training partners and 11 skills training centres under PMKVY 2015-16 were suspended for violating marketing guidelines, making mass or fake enrollments and not adhering to PMKVY branding, according to this reply to the Lok Sabha on February 8, 2016.

Source: Lok Sabha

Nearly 40% of the enrolled trainees in skill development centres in three states—Uttar Pradesh, Haryana and Rajasthan—are ghost entries, the Hindustan Times reported on June 29, 2017. Following this, the ministry suspended allocation of new centres in these states, the report said.

Not enough trainers

The committee report highlighted that many ministries lack training infrastructure and impart substandard training. Some of the short-term courses offered are as short as eight hours and neither meet the skills needs of employers nor provide decent livelihood opportunities.

“The NSDC and SSCs made a mockery of trainers training by giving fresh diploma and engineering graduates 2-5 day training to become a qualified trainer,” the report said.

India needs to train 20,000 skills trainers of various kinds every year, but currently has a capacity to produce 8,268, the committee reported, suggesting that trainers’ selection criteria include basic entry qualification, pedagogy skills and minimum six months’ industry experience.

The way forward

Prime Minister Narendra Modi’s vision of making India the “skills capital of the world” seems a long way off. The committee has suggested a framework, though: “If we take it up as a national goal we can transform India into a developed country by 2040 and make it the “Skills capital of the world.”

One of its key recommendations is implementation of ‘Reimbursable Industry Contribution’--2% of industry’s annual wage bill be collected to create the corpus for a National Skill Development Fund. Small, medium, large public and private enterprises employing 10 or more workers contribute to promote in-firm training as per industry’s own requirement. The employers manage this fund through SSCs, with their costs reimbursed depending on their annual training plans and performance.

“With this effort, the enterprises will be able to train youth according to their requirement, and over a period of time, we can think of an India, which will have 100% skilled manpower,” the report said.

(Mallapur is an analyst with IndiaSpend.)

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