‘Absence of skilled labour translates into failure of companies to create jobs … India needs one million new entrepreneurs’
Romesh Wadhwani, a Silicon Valley entrepreneur, has worked for over a decade on promoting entrepreneurship and skilling in India through the Wadhwani Foundation. He shares his insights on the issues in a conversation with Sanjiv Shankaran:
India is the fastest growing major economy in the world. What are the missing links?
The progress of India on multiple fronts is undeniable. But I do not see job creation commensurate with the rate of growth. Since India is growing at 7% a year, one would think job growth should be at least as much, ideally more and that’s not happening. It’s a big area to focus on as we have this youthful addition to the population going on at the rate of 10 or 12 million new entrants into the workforce annually. Second, if you look at organised sectors, it’s around 60 million people or only 12 or 13% of the workforce. That number has not changed materially.
So, there’s a huge amount of work to be done in terms of job creation and job fulfilment. They are linked. The absence of skilled labour translates into the failure of companies to create jobs because they can’t find skilled labour. So, they don’t invest in a new factory. I think supply creates its own demand if it is sufficiently skilled. And there needs to be major expansion of demand just based on growth rate of the economy.
What can be done at the policy level? Haven’t you suggested an adviser for jobs in the prime minister’s office?
I had made that recommendation three or four years ago at a time when I felt the previous government was paying insufficient attention to any aspect of the jobs issue. Much has changed since then. I feel a whole bunch of job creating initiatives have been established. That said I still think there is a need for a function whether it is a jobs czar who reports directly to the PM where there are set targets for job creation by skill type, and there is a clear connect between policies of different ministries and the tens of million jobs that need to be created. There’s a need to connect the dots.
Where could the initiatives of the last few years be fine-tuned?
India needs one million new entrepreneurs over a 10-20 year timeframe. It sounds impossible when you look at the historical base. The number of start-ups over the last 10 years, the ones that are still alive, is around 10,000. They only create 1,00,000 jobs. The average number of jobs per start-up is around 10.
Clearly there are exceptions to the rule. The definition (here) is the companies which are registered because those are the ones with the potential to grow. If you are a self-employed person you may call yourself a business; it’s highly unlikely you will grow into a 25-person or 100-person company which is where the bulk of job creation will happen. The other interesting statistic is that the rate of company creation of that kind, where there are only 10,000 right now, is about 7.5% a year. It’s just a tiny fraction of what India’s needs are.
In the case of skilling, whom are you working with?
If you think of skilling needs, they would fall into three buckets. One is the base of the skilling pyramid, what we call employability skills. The ability to communicate, some level of digital literacy, some level of project management, customer centricity. The ability to be self-directing and maybe even supervise one or two other people. This is a base and this is the weakest link in the entire skilling system in India.
If you look at the workforce, you have demands for new people that is 8 or 10 million a year. You also have demands for reskilling 200 million people.
If you take the second layer, knowledge about sector skills, that is the kind of work that is being done by National Skill Development Corporation through its partners. On top of the pyramid, last mile of skilling has to be done by employers. They have to take on that responsibility.
How is the scale problem to be solved in skilling?
If you look at the skilling ecosystem, you have the learner on one side and employer on the other. In the middle is a bunch of middlemen trying to provide a value added function. If there was a way to make it possible for learners or candidates to learn at least soft skills without having to go through any intermediary by getting it from a national scale technology platform, that would certainly expand scale.
If I had to pick 80:20 rule, over the next 20 years 80% of our solutions have to be direct-to-learner and 20% to intermediaries. Digital platform is a very important enabler of this solution for the scale of India.