Skills shortages as a growth risk

Written by YRK Reddy | Updated: Jun 23 2007, 08:43am hrs
It is obviously boom time not merely for the economy, but also for a whole generation of engineers who are getting placed a year ahead of course completion at unprecedented salaries. All big companies have projected stunning hiring plans. It is estimated that requirements for many other skills are also growing in sectors such as the retail, textiles, infrastructure, civil construction, pharma, hospitality, hotel, travel, tourism, entertainment and informal services. McKinsey estimates that by 2015, Indian factories will probably require 50% more than the current employment. The OECD employment outlook has concluded that India has outdone Russia, Brazil and China in creating jobs during 2000-2005. Alongside this heartening development, industry has been lately noticing two types of issues in the skill market which can dampen Indias growth story. The first is that companies have been on a hiring spree that appears to concentrate on numbers and compromises on quality and cost considerations. They are also experiencing increased levels of turnover and migration of skills, which add to the costs directly and indirectly. If the trend continues, the cost and quality advantages between India and competing countries might disappear soon. The other notable issue is the relative supply-crunch and neglect of skills in a few segments that were relatively dormant for years and have come alive suddenly. For example, there is an unprecedented need for heavy vehicle operators, construction engineers, electricians, plumbers and associated skills in the infrastructure and housing sectors. Also, nurses, physiotherapists and vets are emigrating in droves, even as the healthcare industry expands in India. The shortage of teachers, horticultural assistants, cooks, chefs and eldercare assistants is expected to worsen. The labour market in India had been characterised by surplus quality and quantity, relative to the demand. The government had resorted to manpower forecasting primarily to assist educational infrastructure and planning that focused on engineers, medical profession and a set of known and unpredictable skills required in a newly industrialising economy. It is fortunate that private enterprise has responded to the demand for new educational courses, and private firms have acted to fulfil their needs. But is there anyone governing the skill-market at the state and national levels
The vision and activities of most of the existing government agencies involved in technical education, manpower forecasts and information dissemination are built on assumptions of the past
The vision and activities of most of the existing government agencies involved in technical education, manpower forecasts and information dissemination are built on assumptions of the past. Long-term forecasts, post-mortems, disjointed efforts and staid reports are of little use. The key question is whether they can support the development of skills with the dynamism needed so that expectations of Indias population dividend and human capital do not prove short-lived. For that, their structures, missions and visions need re-engineering. They must become information providers, motivators and indeed market makers. They should be able to assess the skill requirements within the country, the supply, and the dynamics of outflow, and then feed this information effectively to user markets. Such information will enable private enterprise to come out with new infrastructure that will help bridge the demand-supply gap. They should be able to motivate standardisation of courses relevant for such skills (such as through competence based training) and make them available for adoption and customisation by those delivering the training. They must indeed take charge, create and motivate the entire supply chain of skills required, dynamicallyand stay ahead of the curve. It is possible that the pent-up supply of a range of skills in the country had provided the initial steam to propel growth. The depletion of such steam can soon create a vacuum that may retard the momentum, unless the supply chain of skills is governed better at the national policy level.