India needs an urgent data-driven strategy to plug skill gaps

News Excerpt:

India's rapidly growing youth population presents both opportunities and challenges for its economic aspirations.

India’s Demographic Dividend: 

• The demographic dividend presents a growth opportunity, requiring workforce skills aligned with global economic demands.
• World Bank data shows a concerning trend: India’s labor mobilization rates have fallen from over 70% in 1990 to 56% in recent years. This represents an alarming weakness in India’s economy and threatens to undermine its demographic advantage. 
• As India strives to position itself as a global economic powerhouse, its ability to transform this demographic bulge into a dividend through skill development and labour market reforms is critical.
• A skilled and educated workforce is critical for increasing productivity, fostering innovation and attracting investment, all of which in turn contribute to enhancing national competitiveness.

Workforce Skill Level Analysis:

• An analysis of the Periodic Labour Force Survey (PLFS) data provides more insights into the skill level of the Indian workforce. 

• Data indicates that workforce growth rates differ across skill levels, highlighting shifts in the composition of India's skilled workforce and its impact on overall competitiveness. 

• • It also showed a disturbing trend: a declining growth rate of highly skilled individuals (skill levels 3 and 4). 

• Between 2017 and 2022, the growth rate for these skill levels fell by more than 5 percentage points in at least 22 of India’s 36 states and Union territories. 
• States such as Sikkim, Karnataka, Nagaland, Uttar Pradesh, West Bengal and Goa have had an over 10-point fall in the growth rate of their highly trained workforce.
• On the positive side.
  • The semi-skilled workforce (skill level 2) has grown significantly, with a national compounded annual growth rate of 59.5% between 2017-18 and 2022-23. 
  • More than 45% of the workforce across states falls into this category, showing a growing demand for individuals with intermediate-level abilities. 
  • The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) has made a substantial contribution to this positive trend by offering skill training and certification. 
  • During the same period, skill level 1, which comprises low-skilled workers, increased by 24.8%. 
  • This tendency indicates a continuous reliance on skilled labour across industries, potentially driven by construction, manufacturing or services.

• On the Negative Side: Despite progress, PLFS data shows many workers aged 15 to 59 lack formal vocational or technical training.

• The proportion has dropped from 91.9% in 2017-18 to 72.6% in 2022–23, it still indicates a major gap in formal skill development for a sizable segment of the Indian workforce. 
• The PLFS statistics suggest that semi-skilled and low-skilled workers are likely to dominate the workforce, 
• The growth of high-skilled workers lags. This may have implications for India’s competitiveness.

Rural-Urban skill Disparities:

• On average, rural regions have much lower skill intensity than their metropolitan counterparts. 
• In India, metropolitan districts host skill-intensive trade clusters. 
• Cities such as Mumbai, Bangalore, Delhi and Hyderabad have evolved as centers for IT services, financial services and other knowledge-intensive businesses.
• These industries often require a higher number of skilled individuals such as software engineers, data analysts and financial professionals. 
• As a result, these urban zones naturally attract a more skilled workforce. 
• In contrast, rural districts specialize in agriculture, small-scale manufacturing and traditional crafts, which typically demand a smaller number of highly qualified people. 
• The presence of these businesses in rural areas helps explain the observed lower skill intensity. 
• Addressing this disparity necessitates not only skill development, but also the establishment of skill-intensive clusters in rural areas, which may result in more balanced growth across India.

Way Forward

• The government has aimed to address this through its Skill India Mission, which resulted in expansion of the skill level 2 workforce. But more coordinated efforts are required by state governments.
• Andhra Pradesh proposed a 'skill census' to assess current skills across regions and sectors. 
• If adopted by other states, it could promote competitive federalism by utilizing detailed data.
• By mapping the current skill landscape, policymakers can identify areas experiencing skill shortages and develop focused strategies accordingly. 
• State governments can create specialized skill-building programmes to address the demands of their unique workforces and industries.
• This data-driven strategy can result in improvements in skill-development projects. By addressing the talent gap through targeted measures, India can realize the full potential of its demographic dividend.

Conclusion:

• The road ahead for India’s skill development efforts is difficult, but the rewards are significant. By investing in human capital and utilizing data-driven initiatives, India can turn its demographic advantage into a meaningful economic dividend. A skilled and productive workforce will not only drive innovation and increase productivity, it will also significantly contribute to the overall competitiveness of the nation, accelerating India’s journey towards becoming a developed economy by 2047.