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The placement of these two ministries with one minister is the first step towards improving the employability of India’s workforce in a pandemic.

Skill development is a multi-dimensional problem. One dimension relates to “employer connect” that is essential for productive employment opportunities for the skilled persons. Another dimension is “entrepreneurship” or self-employment which is becoming increasingly important with the rise of the “gig” economy. Yesterday’s vehicle hiring company’s employees are today’s self-employed Uber/Ola drivers. Platforms like these have converted erstwhile salaried employees to “self-employed entrepreneurs”. This role calls for a whole set of additional skills and competencies beyond driving. The third dimension relates to the link between skilling and education. This piece will focus on the optimal integration of skilling and basic education. 

The ultimate purpose of education is not only employment and employability but something far more lofty. However it is generally agreed that access to early holistic and life-long skilling and learning opportunities are crucial to improving employability entrepreneurship and workforce adaptability for our youth. Ideally general education should mean attainment of an integrated set of foundational and transferable skills.

Foundational skills are basic cognitive skills such as numeracy literacy and problem solving that form the base for learning other skills while transferable skills are social communication and behavioural skills that help navigate the work environment. Increasingly it is evident from various studies that these skills have a strong impact on labour market outcomes including wages productivity and adaptability to the changing work environment. These skills are also delivered more effectively in the general academic system. Hence there is a strong argument for developing a holistic skill focus that is not only limited to vocational education. Vocational education especially up to Grade 12 is as much about vocational education as about “applied learning”. It should therefore be viewed not only from an employment or livelihood perspective but as a medium to learning. 

Imparting holistic skills can help make school-to-work-transition smoother. Recognising and imparting technical skills can make education more attuned to market and employer demand. In addition integration of education and skilling pathways can ensure that learners who enter the workforce with limited school education receive training that is crucial to succeeding in the labour market. Out-of-school youth can find flexible opportunities to receive formal skilling and upskilling typically limited once they enter the workforce. Over 70 per cent of India’s workforce is concentrated in firms with less than 20 employees. Studies carried out in 2016 as part of an Asian Development Bank report suggest that micro-firms are 72 per cent less likely to train their workers. 

Similarly while 80 per cent of India’s workforce is employed in informal firms only 3 per cent workers are formally trained. With increased contractualisation of labour the incentives for formal firms to train workers is declining even more. In such a situation the primary and foremost opportunity to skill young people is when they are still a part of the educational system. As they step into a widely informal subsistence-led and disaggregated workforce it becomes much harder to reach and train them. Integrating education with skilling is therefore the easiest path forward. 

The relative disconnect between academic and vocational education today has dual consequences: High unemployability among educated youth due to the absence of “practical” skills and a lack of resilience among vocational skill trainees due to the absence of a broad range of foundational skills that are crucial for meaningful participation in work and life. 

Some efforts have been made in this direction already. However a lot more needs to be done. What is the way forward and why is now the right time to bring education and skills development closer together?

Though any time is a good time to undertake this reform the challenges (and opportunities) posed by the Covid-19 crisis make it the right time to bring formal education and vocational education and training closer together. The pandemic has had an enormous impact on the education sector (leading to learning losses increase in school dropouts). The poorest and most vulnerable children lost out as site of learning shifted from the classroom to online platforms. We are now faced with resolving the pre-existing challenges of improving learning outcomes and enhancing the quality of education and are trying to urgently address a range of new challenges pertaining to ensuring retention reducing the number of out-of-school children and trying to create new learning pathways and bridge programmes to enable those who had to drop out of formal education to “catch-up” and continue learning. Integrating vocational education and training with formal education will play a crucial role in helping students cope with these diverse challenges — and building resilient education systems for the future. 

In addition the pandemic has also rapidly altered the nature of work. As workplaces increasingly shift to a hybrid mode of functioning — new kinds of job roles have emerged and a number of jobs have become redundant. New kinds of skills have become more valuable. For example digital skills which were considered transferable skills or soft skills until recently have now become a core foundational skill — as important as literacy or numeracy. As workplaces are rapidly changing a key skill needed for the future is the ability to “learn to learn” and “adapt” to new modes of working. Strong foundational skills are necessary to ensure that workers are adaptive to change — making it vital to have strong pathways between formal and vocational education systems.

At a conceptual level this involves principally two crucial changes. First mandate holistic skills provision across ITIs schools and colleges. Second develop a common vocational skills curriculum and adopt a credit framework that helps improve mobility between skilling and general education.

The Ministry of Skill Development and Entrepreneurship was created in November 2014 with a lot of expectations. Overall skilling outcomes have not yet met these expectations. The ministry has successfully consolidated skilling initiatives of the Government of India into a common framework. However “skilling” continues to be a poor cousin of “education”. Hopefully the recent decision to place these two crucial ministries under the charge of one cabinet minister is the first step in this long overdue integration which is necessary for better outcomes. 

The writer retired as a secretary to GoI and is now a professor at the National Council of Applied Economic Research. Views are personal

Likely hysteresis and a closing demographic window make a case for wide-ranging reforms to sustain high economic growth Post-covid scenarios chalked out by NCAER indicate that effects of this shock will persist for a long time and we can’t expect a quick return to our pre-pandemic growth path even in the most optimistic of recovery cases.

No one really knows what the long-term consequences of the covid pandemic will be. From the experience gained in India and abroad epidemiologists and doctors have learnt a great deal about how the virus behaves how to contain its spread and how to treat infected persons. But they know little about the long-term health consequences of covid infection simply because enough time has not passed to observe such consequences. However this column is not about the epidemiological and health consequences of the pandemic but it’s possible long-term economic consequences for India.

The seductive symmetry of V-shaped growth curves that often follow an adverse economic shock induces many analysts to quickly pronounce after a shock that the economy is bouncing back. However such curves that simply reflect the ‘bowstring’ effect of a negative shock can be quite misleading. A strong upswing may follow a sharp contraction but all it means in terms of levels is that the economy is getting back to where it was before the shock. In the present case most forecasts have suggested that the Indian economy will grow by about 8% to 10% during 2021-22. This implies the economy will be more or less back to the level where it was in 2019-20 about ₹146-149 trillion at constant (2011-12) prices. Two years have been lost to the pandemic.

But where will the economy go from there? In a recent exercise at the National Council of Applied Economic Research we have looked at a few possible scenarios and their long-term implications benchmarked against a counterfactual growth path the economy might have followed had there been no pandemic. These exercises reveal hysteresis—effects of the pandemic shock that will persist for a very long time.

In the optimistic scenario it is assumed that after recording a growth of over 10% this year the economy will continue to grow at a high trend rate of 7%. Even in this scenario the economy catches up with the ‘no pandemic’ growth path only by 2029-30. In the pessimistic case it is assumed that because of a third covid wave a weak policy response to it and inadequate macroeconomic stimulus the economy will grow at 8.4% this year then settle down to a low steady state growth path of 4.5% increasingly falling behind the ‘no pandemic’ growth path. A third intermediate scenario assumed that effective management of the third wave and appropriate expansionary macroeconomic policies would enable the economy to settle at the pre-pandemic trend growth path of 5.8% after growing at 8.4% in the current year. Despite this the intermediate path will always lag behind the ‘no pandemic’ path because of the two lost years.

Apart from the long-lasting adverse effect of the pandemic the other main takeaway is that the economy can only get back to its pre-pandemic growth path at high growth rates of around 7% or more. Two points are important to note in this regard. Even at this high growth rate the catch-up will only happen by the year 2029-30. This is also the year when our low demographic dependency ratio will bottom out implying that the narrow window for India’s so-called demographic dividend will start closing.

That leaves just a few years to take advantage of this potential dividend. That will entail first a complete reform of our dysfunctional basic education system to improve learning outcomes. That alone will enable secondary school graduates to acquire skills that can make them employable. It will also require a more effective skilling programme driven by potential employers even if it is publicly financed and finally rapidly growing employment opportunities to absorb the large slack of unemployment and underemployment. Absent these prerequisites the demographic dividend will turn into a disaster as has often been pointed out.

The other point is that a high trend growth rate of 7% or more can only be sustained through an ambitious wide ranging 1991-like reform programme to offset the adverse effects of the two-year pandemic shock. The first priority for this in present conditions is a complete overhaul of the network of primary health centres which is the base of our public healthcare system. While this administrative foundation exists it is non-functional in many states.

Hopefully the present crisis will motivate the central and state governments to urgently introduce this reform. The urgency of also reforming our basic education system and skilling programmes has already been mentioned.

A third urgent area of reform is the fragile financial sector. As the latest Financial Stability Report (FSR) points out the gross non-performing assets (GNPA) ratio has not deteriorated further in 2021. But this has happened only because of regulatory forbearance by the Reserve Bank of India on account of covid. The FSR stress tests indicate that even in its base case the GNPA ratio is likely to rise to nearly 10% by March 2022. In a severe stress case it could rise to over 11%. The power sector especially the distribution system in states is another constraint that requires urgent reform attention even as we start a long journey of transformation from high-carbon fossil fuels to renewable energy. Finally the regressive return to discretionary tariff hikes and other protectionist trade policy measures needs reversal if the country wishes to successfully compete in global markets.

Sudipto Mundle is a distinguished fellow at the National Council of Applied Economic Research. These are the author’s personal views.