Skill Development As A Measure To Revive The Economy

Chitra Pandey

With the recent release of Economic Survey and Union Budget for the year 2021, the discussions are now centric to the expected path of recovery for India and whether budget serves rightfully to the economic conditions as concluded in the survey. While there have been different ideas/suggestions regarding the key sectors, however, increasing the employment has remained to be at the epicenter of the revival strategies. 

Before Covid-19 pandemic struck the world, India’s GDP growth had shrunk to 3.2% as per the report based on March, 2020. (National Statistical Office, NSO) [1] Further, when on 23 March, 2020, Prime Minister Mr. Narendra Modi announced a 21-day complete lockdown all over the nation, the economic activities came to a sudden halt.. Lockdown imposed greater uncertainty to the Indian economy which was already undergoing a plunge in consumption, as was witnessed in automobiles industry. Further the economic health of the nation worsened with disruptions in supply. As a result, GDP in April-June, 2020 had actually slipped down by 23.9%. (Ministry of Statistics and Programme Implementation (MoSPI), April-June (Q1) GDP Report) [2] The ‘bad’ were led on to the path of ‘becoming the worse’ after a push from Covid-19 induced situations. Act of God or not, but, our economy was already showing the symptoms of the ill even when there was no hint about an unexpected pandemic striking out on the world and grasping everyone’s attention. In this fight, there wasn’t a country at an advantage and there wasn’t a country at a disadvantage. Each country had a battle to fight and expectantly win it, and India had one even before the world was introduced to pandemic led crisis. 

Crisis imposed due to pandemic, threw light on inefficiencies and deficiencies of different sectors. In such a situation, speculations were being made regarding the shape of recovery. Considering the scenario of our economy, economists expecting a U-shaped recovery wasn’t irrational, however, RBI was of the stern belief that India will face V-shaped recovery.  Having a look at the trend of GDP growth (as shown in the graph below), India did face the much assured V-shaped recovery. However, in words of ex-RBI governor, Raghuram Rajan, ‘It is too early to heave a sigh of relief.’ [3]

 

Figure 1GDP Growth Rate, Source: Press Reports of MOSPI

In addition to the crisis led by pandemic, India at present is not only dealing with real economic slowdown, as can be seen from the downward trend of GDP growth, but also the financial problem and meltdown of financial sector. [4] Raghuram Rajan, in another of his interview said that, 

At this point, I keep saying that we are missing the need to repair. There is a lot of repair and relief that is needed in the economy. And we focus too much on stimulus, when in fact, there are parts of the economy which are hurting deeply and need support.” [5]

 He has repeatedly laid emphasis on careful structural reforms. [3] [4][5] In fact today, as a direct impact of pandemic, India is witnessing structural reforms in the way work is done today. ‘Work from home’ was widely adopted. Online mode for classes was accepted. Even the businesses tried adopting digital platforms to continue their operations. As per the survey conducted by Local Circles, of those consumers who use video calling, 34% spend over 4 hours on weekly basis. [6] The transactions have also become increasingly digital as per people’s preference (as can be deducted from table below).  Thus the post Covid-19 period shows the importance of the digital platforms and these change are more permanent rather than just temporary structural changes caused due to the particular situation, like it happened earlier when India was faced with the move like demonetization. The change in digital platforms user base among households can be seen from the table taken from Digital Payments Adoption Report, 2020 published by National Payments Corporation of India (NPCI). [7] In all, this highlights the increasing importance of digital platforms in the post-pandemic era.

 










Figure 2Digital Payments Adoption, Source: NPCI, Digital Payments Adoption Report, 2020

In addition, UNDP’s India Skill, 2018 that reached out to about 5,200 institutes covering 9 education domains across all Indian states and union territories and corporate players from 12 diverse industry sectors to study the employability condition in India sows the result of that 45.60% of the students are employable. [8] Also, as per the Manpower Talent Shortage Survey, India faces 63% skill shortage. [9] Both the surveys point towards increasing skill shortages. Now, consider the added structural changes that are imposed by pandemic to the skill gap. Thus, this article stresses upon the dire need for India to steer its human capital towards skill development. Globally, India is viewed to be at a demographic advantage for its higher working population, however, if India fails to manage and utilize this advantage, India will rather be disadvantaged and burdened with the same population. From the history of civilizations and revolutions, human being has always been seen as a significant factor in driving change in the world. Thus, when there is discussion revolving around the structural reforms and transitions, human capital needs to be transitioned along and drive the transition as they develop. Earlier in this article, we have already discussed the recovery of economy, and its shape. My argument is that it is much likelier to bring about a V-shape recovery and strong comeback from uncertainties, risks and shocks if the human capital is competent enough to transmit the transition. How effective reforms and policies are, is largely dependent on the transmission mechanism. Thus, continuous skills development is of importance and is highly recommended in order to deal with the current crisis or any uncertainties in the future. In the recent Union Budget 2021-22, 3000 crores have been allotted to boost apprenticeship that is said to bring skill development. Also, collaboration with Japan is intended to transfer skill, knowledge and technique. [10]

Besides, one of the most interesting phenomenon that India had to witness during lockdown was reverse migration, wherein, migrant laborers walked back to their homeland, that is, back from urban areas to rural areas. During lockdown, when most of the economic activities came to a sudden halt, this pattern of migration laid an additional stress upon rural economies in providing employment opportunities. India is not only facing problem with skill gap, but there is also problem of generating job opportunities to employ a large population of human capital. As per Centre for Monitoring Indian Economy (CMIE),  unemployment in India had been 8.75% in March 2020, which rose sharply to 23.52 % in April, 2020. [11] In this scenario, skill development and vocational training can help curb these problems. It is essential to study the Unemployment in India- A Statistical Profile compiled by CMIE [11] wherein the problems and disparities of employment opportunities has been seen and analyzed in a great detail. A transition from steep rise in unemployment in April-May to pre-Covid level in August (as seen from graph below) can largely be attributed to MNREGA. However, in a research paper, titled “MGNREGA in the Times of COVID-19 and Beyond: Can India do More with Less?by Gayathri Vasudevan, Shanu SinghGaurav Gupta & C. K. Jalajakshi , problems in efficiency of MNREGA has been discussed as the paper shows that MNREGA has failed in providing assured minimum days of work to the most needy. [12]

Figure 3Unemployment Rate in India, Source: Centre for Monitoring Indian Economy (CMIE)

In the wake of pandemic, India has come to witness and accept a lot of problems and areas like never before. Story of migrant workers in India is one such area of study that gained greater attention due to hardships imposed on them due to lockdown. Informal sector has always been a challenge for Indian economy. Finance minister in the recent Union Budget has made an attempt to deal with hardships and challenges faced by the mass of informal sector labor force. One Card, One Nation can benefit migrant labors greatly. In addition, a portal to collect data on informal sector labor force can help drive better reforms. Aid has also been stretched to gig and platform workers (discussed later in the article) in the form of social security. All of this in collective will strengthen the informal sector of India. [10]

One of the focus of Government of India has been startups and entrepreneurship. India being the 3rd largest startups ecosystem enjoyed 15% of growth rate in the startup ecosystem in 2018 with corporate connect and government support being two important drivers. [13] Also, startups and MSMEs have been at focus in stimulus like 20 lakh crores stimulus package being announced during pandemic. Also, as per budget 2021-22, allocation to MSME has been doubled. [10] Thus, this highlights the importance of skill development in entrepreneurial terms. When more emphasis has been laid of providing support to startups to grow and flourish in the competitive market conditions. This also highlights the need, for those who are interested, to adopt and learn the skill required for entrepreneurship. Thus, skill development can help in the revival of the economies by giving a push to the stagnant markets today. If more people are skilled, more people can avail more choices to choose job in the market.

This article further wishes to introduce the term “Platform economies” to concatenate the 3 aspects discussed until now: Digital, Skills, Employment. For those who are unaware, platform economies are like digital interactive platforms/markets which allows the interaction of demand side (let’s say who wants to avail a service) with the supply side (who is providing the service) and fetches supply side the demand that it looks for. Examples of platform economies are Amazon, Uber, Netflix, and includes any platform that allows for collaboration of two or more parties. Platform economies aren’t necessarily based on transactions, but can comprise of lot many activities that requires the interaction. Setting up the hierarchy: Digital economy includes platform economies which in turn comprise of demand economies. Gig economy is however, the shift in employment trends towards contract based, short term work. (There are other types of economies too. However, for the relevance of this article we are restricting our discussion to these economies) One of the biggest advantages of these economies is that they provide flexible working/ staffing. India is emerging as the 5th largest country for flexi-staffing and states like HaryanaMadhya PradeshAndhra PradeshGujarat and Telangana have most opportunities in terms of growth for the flexi-workers. [14] In a report published by Asia India Foundation, June 2020 on “India’s Emerging Gig Economy: The Future of Work for Women Workers” India is claimed to share one-third of total global freelancer market.

After pandemic hit India, some of these platforms started to lay off a good chunk of its employees while some actively participated in doing the good to help the deprived and some extended their hands to provide their services to help the front-liners. [16] Taking the case study of Uber, [17] during lockdown, when there was no medium of transportation available, Uber facilitated the transportation of healthcare workers/staff under the new service- Uber Medic. Uber Medic in partnership with National Healthcare Authority (NHA) offered free rides 24/7 with the aim of optimizing the availability of healthcare services during such times. Under the partnership of NHA, Uber adopted some precautionary measures. Uber medic cars were fitted with roof-to-floor plastic sheet in order to minimize the contact between the driver and the rider. With the help of partnered hospitals, the drivers were provided with the equipment like gloves, masks, sanitizers and the disinfectant sprays. Uber also partnered with platforms like Flipkart, BigBasket to facilitate the delivery of essential commodities among their customers. Uber Care Drivers fund in partnership with Give India and Samhita was created to cater to the needs of the drivers associated with Uber. In addition, Uber also showed an intention of generating more funds for drivers through its partnership with Milaap, a crowdfunding organization. [18] Thus, with better coordination with platform economies, we can channelize our economy towards the betterment and make a certain services easier and quicker to reach the needy during the tough times.

However, the negative impact created was on the health risks and the income loss faced by the gig workers (drivers in the above case). Irrespective of the organizations claiming to provide financial support in regard to forms of support that the organization offered, but the reality stood darker than it seemed. Most of it was due to the ignorance, the lack of enforcement and non-entitlement to social protection measures. [19] It is not an unknown fact that the platform economies are gaining momentum in the job market and after discussing the role and opportunities that these platform economies can play in generating employment, it is seen as an essential to give these economies and the active partners engaged with the due considerations that is given to workers in the traditional market. In the union budget, it was announced that the 4 labor codes are still under the path of implementation, that can help deliver benefits to gig workers and platform economies. [10] Since platform economies are purely digital, there is a need for digital fluency in order to access and avail them. The rate at which they are gaining momentum today, they may soon begin to replace the traditional job market. In that case not possessing digital knowledge or not being fluent digitally will only be paving a way for ‘technological unemployment’. [20] Also, the gig work engages vocational knowledge/ skills of the work. Hence, vocational knowledge becomes mandatory to engage in gig economy.

Measures to promote Skill Development

So far, the discussion in this this article has been centered around the need to focus on skill development if we seek to revive our economy, however, actual challenge lies in the promotion of skill development. Having population belonging to such diverse set of economic activities and sectors, it becomes a challenge to provide skill development meeting the requirements of all. However, in my opinion there are a few small beginnings that we can begin with to one day adopt more complex approaches to provide for skill development.

  1. There is a need for collaborative approach. Besides collaborating with the international agencies to gain skills and build knowledge, if the industry collaborates, we can provide a set of skills that are demanded and required in the market. This can help meet the immediate skills gap. And not just for the students but also for the already engaged labor force to update their skills with changing times.

  2. It is never an easy task to reach the individuals and awaken and aware them regarding the need to develop the changing needs in skills, hence assistance of civil societies working in the concerned domain can help promote skills development better. This will lead to a more inclusive form of development. 

  3. In addition, we can continue with digital melas/ training camps to continue creating digital fluency in the economy that is increasingly going digital. 

  4. Also, increased availability and acknowledgement of online skill based certificate courses can help avail the benefits of platform economies and gig work wherever possible. This also lays emphasis on greater acknowledgement of vocational training

Skills development can lead to increase in employment and better employment opportunities, not only quantitatively but also qualitatively. It can also bring about the technological advancement and innovation and can further lead to the overall development of the economy.

 

References:

[1] Press Note On Provisional Estimates of Annual National Income 2019-2020 And Quarterly Estimates of Gross Domestic Product for The Fourth Quarter (Q4) OF 2019-2020, released by National Statistical Office and Ministry of Statistics & Programme Implementation

https://mospi.gov.in/documents/213904/416359//PRESS%20NOTE%20PE%20and%20Q4%20estimates%20of%20GDP1600850161778.pdf/661ea24e-9ac7-1444-94f2-be87f79d773e

[2] PRESS NOTE ON ESTIMATES OF GROSS DOMESTIC PRODUCT FOR THE FIRST QUARTER (APRIL-JUNE) 2020-2021, released by National Statistical Office and Ministry of Statistics & Programme Implementation

https://static.pib.gov.in/WriteReadData/userfiles/PRESS_NOTE-Q1_2020-21.pdf

[3] “Raghuram Rajan’s 10-point guide on what will and won’t work for India in a pandemic”, published in The Economic Times, on Jan 14, 2021
https://economictimes.indiatimes.com/news/economy/policy/raghuram-rajans-budget-advice-to-finance-minister-nirmala-sitharaman/articleshow/80266549.cms

[4] “Straight forward ‘yes’ to help India, says Raghuram Rajan”, published in The Economic Times, on April 13, 2020 https://bfsi.economictimes.indiatimes.com/news/policy/straight-forward-yes-to-help-india-says-raghuram-rajan/75121761

[5] “India’s economy to get back to pre-COVID levels only in late 2022: Raghuram Rajan”, published in ETNOW Times, on Jan 13, 2021

https://www.timesnownews.com/business-economy/economy/article/exclusive-indias-economy-to-get-back-to-pre-covid-levels-only-in-late-2022-raghuram-rajan/706930

[6] Local Circles survey on “How much time consumers are spending each week on group video calling apps” 

https://www.localcircles.com/a/press/page/whatsapp-zoom-video-conferencing-usage-india#.YCd31I8zbIU

[7] Digital Payments Adoption Report, 2020 published by National Payments Corporation of India (NPCI)

https://www.npci.org.in/PDF/npci/knowledge-center/Digital-Payment-Adoption-in-India-2020.pdf

[8] India Skills Report 2018, published by United Nations Development Programme (UNDP)

https://www.undp.org/content/dam/india/docs/poverty/india-skills-report-2018_undp.pdf

[9] Manpower Talent Shortage Survey on Skills gap in India- https://www.manpowergroup.co.in/talent-shortage.html

[10] Press Release on Key Highlights of Union Budget 2021-22, by Ministry of Finance, posted on 01 Feb, 2021-https://pib.gov.in/PressReleseDetailm.aspx?PRID=1693907

[11] Unemployment Rate in India, by Centre for Monitoring Indian Economy (CMIE)-https://unemploymentinindia.cmie.com/

[12] “MGNREGA in the Times of COVID-19 and Beyond: Can India do More with Less?” by Gayathri Vasudevan, Shanu SinghGaurav Gupta & C. K. Jalajakshi, published in The Indian Journal of Labour Economics-https://doi.org/10.1007/s41027-020-00247-0

[13] Indian Startup Ecosystem, Startup India, Government of India-https://www.startupindia.gov.in/content/sih/en/international/go-to-market-guide/indian-startup-ecosystem.html#1497938344123

[14] “Gig Economy – Shaping the Future of Work”, published in Invest India > Team India Blogs, on Jan 16, 2020

https://www.investindia.gov.in/team-india-blogs/gig-economy-shaping-future-work

[15] India’s Emerging Gig Economy: The Future of Work for Women Workers, June 2020published by Asia India Foundation 

https://asiafoundation.org/wp-content/uploads/2020/07/Indias-Emerging-Gig-Economy_The-Future-of-Work-for-Women_update7.24.20.pdf

[16] “Gig Work and Platforms during the COVID-19 Pandemic in India”, by Shipra Minaketan Behera, in EPW Engage, on Nov 11, 2020

https://www.epw.in/engage/article/gig-work-and-platforms-during-covid-19-pandemic

 [17] “Uber Provides UberMedic Service to Assist Healthcare Providers”, written by IndiaSA Comms Team, in Uber Newsroom, on Mar 31, 2020

https://www.uber.com/en-IN/newsroom/uber-provides-ubermedic-to-assist-healthcare-providers/

[18] “Uber stands in Solidarity with India to contain Covid-19”, written by Pradeep Parameswaran, President India and South Asia, in Uber Newsroom, on April 9, 2020 https://www.uber.com/en-IN/newsroom/as-we-move-forward/

[19] “Covid-19: and relief measures for gig workers in India”, by Zothan Mawii, published in Tandem Research > Technology and Society, on April 14, 2020

https://tandemresearch.org/blog/covid19-and-relief-measures-for-gig-workers-in-india

[20] Technological Unemployment- https://www.economicshelp.org/blog/glossary/technological-unemployment/

 

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