The reports of my death are greatly exaggerated,” Mark Twain famously said after his obituary was mistakenly published in a New York journal. There are those who would say that the same applies to the India growth story. Is it dead? Is it dying? Is it comatose? Or will it come alive when we least expect it?

Speculation is rife.
India’s slowing annual economic growth has been a major topic of public discussion in the country in recent times. And given the plummeting gross domestic product (GDP) growth, it is likely to stay that way. In the coming days, as the Budget is discussed threadbare and analysts ask each other if politics is destroying India’s growth story or if economics can still triumph, expect more hand wringing.
Amidst all the sound and fury about jobs and growth, populism versus pragmatism, however, there is one vital issue that is not flashing on the policy radar as brightly as it should. Skilled youngsters could be India’s growth serum. So why is there hardly any talk about the need to invest money in skills upgradation? The point came home to me starkly while I was chatting with a man from a village in Uttarakhand last evening. He was in his early 20s, had dropped out of school after the eighth grade and come to Delhi in search of work. With no formal qualifications, no particular skills and barely any knowledge of English, there were not too many options. He had to choose between work in a restaurant kitchen, as a waiter in a hotel or as an attendant in a beauty parlour. He chose the last because it was a reputed parlour and offered the best deal. But after a year on the job, he feels he is stuck. The beauty business is booming. But without vocational training, basic English and social skills, he feels handicapped. There is no money for expensive English classes; so the young man is quick to spot anyone with whom he can practice everyday English.
Which brings me to the core issue — skills. While one has been hearing a lot about how it is imperative to boost investor confidence in order to get back to the growth trajectory so that jobs are generated, there is relatively little discussion about what we are doing to prepare our young for the jobs. The young man I met is part of the India growth story — he moved with his feet to where he thought these very jobs. But having arrived at his destination, he finds himself mired in stagnation, as he does not have the skills to forge ahead.
How does a young man like him relate to the heated discussion about India’s growth story? Seventy per cent of India’s population is below the age of 35. But without the necessary skills and human capital, a huge number among this population will not be able to tap into the economic boom even if investors come knocking and the market surges.
According to the 12th Five-Year Plan (2012-2017), India’s mean years of schooling at 5.12 years is well below other emerging market economies such as China (8.17 years) and Brazil (7.54 years) and significantly below the average for all developing countries (7.09 years). Of particular concern is the steep dropout rate after primary school. The plan document also points out that learning outcomes for children in Indian schools are far below corresponding class levels in other countries.
If we vigorously push for steps to shore up investor confidence so that more jobs are created, why don’t we simultaneously demand that there be more political will to ensure that young people do not fall through the cracks, and that they be supported to acquire the knowledge and skills relevant to jobs in the emerging economy, their personal circumstances notwithstanding.
For this to happen, a lot more investment is needed, as the plan document itself points out. Secondary schools will need teachers/trainers who have technical skills and equipment that can be used to impart technical and vocational skills.
In 2008, the government announced the National Skills Policy. We have the National Skill Development Corporation (NSDC) with a mandate to contribute significantly (about 30 per cent) to the overall target of skilling/upskilling some 500 million people in the country by 2022 in partnership with various ministries, departments and the private sector. But recent media reports suggest that NSDC funding maybe cut by `1,000 crore in the current fiscal year. What does this mean for India’s skills-training initiative?
In a recent essay titled “Why is poverty declining so slowly in India” posted in Ideas for India — an economics and policy portal — Dr Ashok Kotwal and Dr Arka Roy Chaudhuri offer interesting insight on the link between skills and “growth” in India. The two academics from the University of British Columbia say that between 1993 and 2004, the fastest growing sectors were mostly high-end services such as business services, communications, research, hotels and restaurants, banking, insurance etc. There were only three non-farm sectors that did increase the employment of the unskilled — trade, transportation and construction. During this period, the labour force working in agriculture declined by seven per cent and almost all of that labour was absorbed in these three sectors. The pattern of growth changed slightly from 2004 to 2009. A few manufacturing sectors such as electric machinery, metal products, wood, furniture and transport equipment joined the list of fast-growing, high-end service sectors. However, the fact remained that growth in none of these sectors provided much employment to unskilled workers. In fact, many shed unskilled labour. Almost all the additional jobs created for the unskilled during this period were in a single sector — construction.
So why did the sectors that employed unskilled labour not grow fast? Dr Kotwal and Dr Roy Chaudhuri offer a telling example: “When a software engineer working for Infosys sees an increase in her income, how would she spend this additional income? She already has a driver, a maid and a cook. She is not going to hire more domestic help. She might buy an iPad, visit more holiday resorts and buy higher quality processed and unprocessed food items. The component of value added by the unskilled in producing these items is quite limited.”
Which brings one back to the young man working in the beauty parlour and his future. Talk about shoring up India’s growth must also address how unskilled people like him can forge ahead and what needs to be done to improve their productivity. In cash-strapped times, there is not enough money for everything. That is well understood. But unless cash is ploughed into the basics like development of a skilled labour force, there won’t be a dazzling growth story.

The writer focuses on development issues in India and emerging economies.