Naukri.com’s monthly Job Speak index for December is notable because it bucked a seasonal trend by actually recording a growth over November. Although the last month of the year usually sees a dip in hiring owing to the holiday season, this year the index was described as “stable”. Apart from telecom, ITeS and banking, which saw the usual dip, hiring across all sectors was as robust as ever. This suggests that India is firmly back on the growth track and the job market and salaries are expanding exponentially. The bad news: India is headed for a talent crunch. The second point represents much more than just a headache for the HR managers in corporations. The skills gap is no longer one of India’s many problems: it is reaching crisis proportions and could well become as critical as land acquisition and infrastructure shortages in constraining growth. The shortage, as any corporation will attest, is universal.
This is not only the result of surging growth but the lack of appropriately skilled talent. Indeed, it is ironical that India has a peerless demographic advantage in being a young country. Over 770 million of its population of 1.2 billion are under 35 years and the country’s average age is 25 years, a near decadal advantage over China’s average age of 34 years. Also, India churns out about 200,000 MBAs, 600,000-plus engineering graduates and an even larger number of ordinary graduates every year — among the highest in the world. Yet, by some estimates, only a third to a fourth of these are employable. Again, there are about 7,000 Industrial Training Institutes (ITIs) in the country, but it is an open secret that most of these have curriculums that are so outdated as to be useless. The net result — as elsewhere in the education sector — is the mushrooming of dubious private institutes that derive rents from this yawning delivery gap.
At the other end of the scale is persistent unemployment. According to government statistics, about 13 million people enter the labour market every year, but the government is able to provide only 2.5 million vocational training seats. To understand the crisis, consider the steel industry. Indian steel makers plan to add 120 million tonne of capacity in 2010-2020. To achieve that, according to one website, the sector will require more than eight million people. Yet today, finding even a crane operator is a huge issue; it entails paying huge premiums for relatively low-value skills, a practice that will eventually eat into companies’ competitive advantage. To be sure, the government has launched various initiatives to create 500 million skilled people by 2022 but given the fate of similar past initiatives, it would be optimistic to pin too much hope on them. That brings us to the private sector; it is already finding its own solutions by investing heavily in training. The issue, however, is one of rapid scalability, which is why it is difficult to escape the PPP model. Some early partnerships are beginning to pay rich dividends, notably in Haryana where the state government allowed vocational training institutes to be registered as not-for-profit societies. Similar ventures on these lines will go a long way towards converting private initiatives into a sustainable public good.