Vocational Education in India: A Big Opportunity

Posted on January 31, 2012 in Learning+

By Shajan Samuel:

One need not explain the meaning of Demographic Dividend in the present context, as it has been India’s trump Card during the recent high growth period. But, the apparent demographic dividend has mostly resulted into a mistake. We need our youth to be productive in a much more effective and extensive way. The 93 % of employment in unorganized sectors is a shame for a country of the size of India. Keeping in mind the nature of work force available in India, we need more jobs which involve semi-skilled and manual labour, or to go a step ahead a more extensive provision for vocational training to better utilise the available labour. This Demographic Dividend might very well have extremely negative effects, if we fail to skill our youth quickly.

India’s GDP is split 17%, 28%, and 55% in agriculture, industry and services, respectively. Similarly, the employed workforce splits 52%, 14 and 34% respectively. The disproportionate services GDP is an anomaly in an economically poor country like India. The vast majority of service employment in India is in low-level and low-paying industries. The contribution of higher-level industries to the services GDP is driven by the information technology and software sectors which do not employ large numbers of people.

States like Uttar Pradesh, Rajasthan and Madhya Pradesh contain so much potential than already put in use; these are the states from where the demographic explosion is confirmed. Yet keeping in mind the present scenario they are still likely to contribute insignificantly to the GDP. The laggards will have to be the front runners in every sphere to overcome under performance, but the challenges are insurmountable.

Indian spends $600 billion yearly on education. With this India’s education sector is bigger than that of the US. India is the 9th highest in the world in this context. India’s yearly growth in overall education expenditure at 15% is also one of the fastest in the global system.

The estimated Compound Annual Growth Rate (CAGR) of private revenue in Indian education is roughly 19% from 2011 to 2015, one of the highest in the world again. On the same lines vocational training is emerging as big opportunities for private players. High growth, scarcity of investable opportunities and the recession-proof nature of the sector are likely to keep valuations high.
From $30 billion in 2012, private education revenue is expected to reach $45 billion by 2015. Some of the estimates are: K-12 (Kindergarten to 12th grade- $20 billion, technical education- $12billion, coaching- $8 billion and pre-school $3 billion.
The affluent class groups in urban areas spend 10.4% of the total consumer expenditure towards private education. On the other hand rural poor spends just 1.4% of their income on education. With the median income elasticity of demand for education at near 2, a 1% rise in per capita income leads to a 2% jump in spending for education, mostly on private education. This is the key driver of the sector.

Indian education is in a dismal state with only about one out of eight children who start first grade graduating from 12th grade. According to World Bank data, India’s literacy rate for ages 15 and above places it in the last quartile of 114 countries.

Inclusive growth can be effective when there is an attempt to uplift more students who are under the Below The Line (BTL) and provide them with vocational training for jobs. Dichotomy between public and private is pivotal to bring both scalability and skill to move things at a faster pace. Speed in execution is mandatory.

State Governments have initiated an array of schemes. One such scheme run by the Andhra Pradesh Government is the Employment Guarantee Marketing Mission Scheme, under which the Government partners with education agencies to train and place students from BTL in a better position. Government further reimburses the entire fee including boarding expenses. The programme prolongs for 400 hours predominantly in retail, sales and marketing customer service. The highlight of the programme has been the placement success which is currently clocking at 70%, companies like Café Coffee day and Macdonald in hospitality sector, Big Bazaar and more in retail, Hindustan Level in FMCG and so on hire extensively. There is a need for many more such Government funded programmes.

58 % of our graduates suffer from some sort of skill deficiency, and require last mile intervention to make them employable. At the same time companies don’t want to pay for trained man power as the wages will have to be higher.

“India will account for 20 per cent of the world’s global workforce in 2020s. The average age of Indian workforce will be 29 years as compared to 37 for the US and China and 45 years for Europe”, Kapil Sibal, minister for human resource development, communications and IT said at the India Economic Summit 2011 in Mumbai.

Never before in the history of any country has human capital development been such a key focus area as 2011 was for India, marking the beginning of better times. The huge demographic dividend India can for sure reap from its large young population, with 250 million to 400 million people joining the employment market between now and 2025 to fuel its growth. This is a staggering number by any standards. However, to become productive these huge numbers have to be suitably trained to avoid large scale unemployment, which needs greater emphasis than rejoicing the fact that we have the largest youngest population in comparison to other countries.

To be more specific, 109 million persons will attain working age during the period of 2007-2012. The net addition to workforce is, therefore, expected to grow to 89 million of which around 13 million are likely to be graduates/post graduates and about 57 million are likely to be school drop outs or illiterates. A significant share of incremental demand is likely to be for skilled labour — graduates and vocationally trained people are expected to account for 23% of incremental demand by 2012. The study further estimates that India is likely to increase deficit of 5.25 million employable graduates and vocationally trained workforce by 2012.

Vocational education could be a great way to counter this challenge. India’s current capacity for vocational training is just about 4 to 5 million per year against a requirement of 10 times that. Hence focusing on vocational education is of primary and immediate importance for the country.

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Mohit Agrawal

There needs to be some profitable business in Vocational Training. It will enhance the interest of people towards this. It will also give more satisfaction in terms of social work.
Are there any existing ventures which promote V-training? by Private equity or Venture capitalists

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