The employment conditions of existing labour market participants are important for two reasons. First, they constitute the largest part of the labour market and skilling them will have the fastest impact on manufacturing productivity. The abysmal growth of manufacturing in the last quarter is testimony to the urgency of this need. Second, there is increased investment in high tech industries. This process is accelerated with the increase in FDI in these sectors. Not only does FDI introduce advanced technologies used in developed countries, but, it also forces local competitors to adopt these technologies to remain competitive. Workers in these industries will require constant up gradation of their skills to keep pace with the demands of new technology. The increased automation in these high tech industries would also require them to be able to program these machines adequately.

Thus for workers to keep up with the pace of technology, constant and periodic up gradation of skills is needed. While the government may have the schemes in place on paper, a study of the Industrial Training Institutes and firms indicated that they are not implemented in practice. The production managers of several firms were interviewed as a part of a survey in the textile clusters located in Gurgaon and the automobile and electronics clusters in Aurangabad. We also interviewed graduates and teachers of Industrial Training Institutes (ITI s) for the same survey. The interviews indicated that most of the ITI s in these areas have outdated syllabi and poorly implemented courses. In addition to this, the employers that were interviewed complained about the inadequate exposure of workers to new technology. The employers had to intensively train the workers on the job even after they graduated from these institutes. The latter was a frequently cited problem in the electronics industry, a high tech industry. It was also found that training workers was difficult for employers due to poor foundational skills. Analytical skills, communication skills and theoretical knowledge were identified as problem areas by the employers.

Skill up gradation of the labour force requires active participation of the industry. The fastest way to keep up with the skill demand in the market is to train workers on the job. In fact, several firms have adopted this model of on the job training, with Siemens being a case in point. The infirm training is a two-step process. Firstly, the workers are trained in their machinery in the starting few months of their employment. Secondly, up gradation happens through classes that take place post working hours. These classes introduce workers to both the basic theory and practical application of the new technology that is going to be introduced. In this context, firms could sponsor their workers to enrol in skill development programs and enforce a contract that requires the workers to continue working with them for some period of time after the training.

While employees of large firms are in a position to receive this training, the small and medium sized firms may not be able to invest in their workers in this manner. Apart from the cost of putting workers under training, the large turnovers in small firms also works as a strong disincentive for employers to sponsor training.

As a result, there exist gaps that are required to be filled by government sponsored skill enhancing programs. Government programs can introduce short term or part time courses targeted to improve certain skills. These programs have been implemented in the Textiles Industry[1] but need to be expanded to many other sectors. Other than machine specific skills, the foundational skills of the workers can be built only through a strong education system. Good quality basic education needs to be provided to create a good quality workforce that has strong analytical abilities and good communication and comprehension skills. This trainability of the workforce has been cited as the key issue with the Indian labour market rather than the kind of skills gap than employers report [2]. The government needs to recognise this in its efforts to create a labour force resilient to the winds of technological change. The benefits of basic education extend beyond skill up gradation to improving mobility in the labour market too as strong analytical and communication are broad based skills and ease the transition from one industry to another.

Joint effort on part of the government and the industry is a third alternative for building these programs. The experience of China provides a good model for India to adopt especially since China and India are both developing economies with a large labour force. China has some of the highest FDI in the world as well as one of the most expansive vocational training programs. The Chinese model requires compulsory participation of the industry in these training programs (Mehrotra et al 2014). The firms are mandated to send some of their employees to train workers in these vocational institutes. These employees then bring in knowledge of the newest technologies to rest of the workers and thus aid the government in improving the skills of the labour force. Other than China, Singapore has a skills development framework which works on the collaboration of the industry or the firm. As analysed by Kuruvilla et al (2002), the legislation requires employers to contribute 1% of gross salary of all employees earning less than 1000s$ a month into the skill development fund. The firms can then recoup a percentage of their funds by requesting grants for skill development. In addition to this, incentives have been provided to foreign investors to set up training centres. These firms are guaranteed the right to hire a proportion of the graduates of the institute. This handles any problems of free riding that these investors may have faced.

Skill up gradation programs to improve long term employment prospects aren�t emphasized enough in the skills agenda of the government. The government needs to learn from the experiences of countries such as Singapore and China to develop these programs so that it can empower the employed.

–Arpita Patnaik



[2] Mehta et al (Working Paper): Making Sense of India�s Skills Gaps



1. Kuruvilla, Erickson & Hwang (2002) An assessment of the Singapore Skills development System: Does it Constitute a Viable Model for other Developing Countries?

2. Mehta, Ghosh, Patnaik (Working Paper, 2014): Making Sense of India�s Skills Gaps

3. Mehrotra, Gandhi and Devi (IAMR Report 2014): Understanding Skill Development and Training in China: Lessons for India