• In Conversation

Entrepreneur (E): Why do we need an institution like the NSDC?
Dilip Chenoy (DC): India does not have the number of skilled people needed across various disciplines. But those numbers are needed because the economy, as a whole, needs to grow at a rate of 10-12 percent. At the NSDC, we did a survey of the skill-gap in 21 centers. Industry bodies claimed (at the height of the recession) that over the next 12 years they need 240 million people just to maintain the current growth rate. The education system produces about 12 million graduates and another 4.3 million people who come out of the education system as skilled people. If you multiply this by 12 you are woefully short of the number of people that we require to maintain the growth in these centers. There is a huge gap between demand and what comes out from schools, universities and, most importantly, in the vocational space. In the vocational space, there is a dire need for the 4.3 million to grow into 40 million a year. Hence, we need an eight-fold expansion.

Also, you must look at the quality of the labor force. A lot of people who are graduating out of the system cannot be employed. Another issue is that of qualification. Regular degrees like BA, MTech or MA are just not enough. What worked in the past will not work in the future and you need disruptive changes by making people pursue courses which bridge the demand and supply gaps. The NSDC’s role is to facilitate or catalyze initiatives that can potentially have a multiplier effect as opposed to being an actual operator in this space. The NSDC looks to involve the industry in all aspects of skill development. The approach is to develop partnerships with multiple stakeholders and build on current efforts, rather than undertaking too many initiatives directly or duplicating efforts currently underway.

Our objective is to skill/upskill 150 million people by developing ultra low-cost, high-quality, innovative business models, and by attracting significant private investment.

E: Which are the sectors that the NSDC operates in?
DC: The NSDC provides services to 21 sectors including automobile/auto components, electronics hardware, textiles and garments, leather and leather goods, chemicals and pharmaceuticals, gems and jewelry, building and construction, food processing, handlooms and handicrafts, and building hardware and home furnishings.

E: What is the role of private sector here?
DC: One way that businesses or the system can bridge the demand supply gap is by roping in the private sector. If you look at Indian institutions, some of the best universities in India still follow backdated syllabi. Some of the best automobile engineering schools are still teaching students on the Premier Padmini engine model. We need investment to come, which will only happen if you have a very clear return on investment. You can do that without profiteering. There is a difference between sustainability, profit and profiteering.

People see through the system. You need an ecosystem that allows you to get investment value. We, at the NSDC, are trying to put in large scale systemic models in the areas of vocational and skill development. It may not necessarily be aimed at a school dropout but can be aimed at a graduate or in-service people. If you take 500 million people and say it will cost Rs.2,000 to skill per person, you essentially need Rs.1 lakh crore. This money is not available in the government system. You need to generate it from the private sector and the private sector will come in only when there are for-profit entities or not-for-profit entities which are sustainable and ploughing back their money. We also need innovations and technology.

If we look at an engineer or a doctor, they are all skilled people and are willing to pay for their education because they get something in return. So, if you change the ecosystem and make the output demand-driven [like an education which will help you get a job] people will pay for it. If you take that as a system and reduce the cost of training; if you get the cost of education to be repaid back in some particular way, then it becomes fully fundable.

Again, how do you get innovation to play a part in the problem? How do you take a few teachers to a million students? People are doing that. Pratham, for example, is setting up a skill development initiative through innovative means. It is an NGO but also making surpluses and reinvesting it. Centrum is also doing the same thing. They are making money for the investors. Remember, if you need Rs.1 lakh crore to come in, you need private money. There is a lot of private equity possible in this space.

E: What is the NSDC’s funding role?
DC: The NSDC provides financing either as loans or equity, providing grants and supporting financial incentives to select private sector initiatives to improve financial viability through tax breaks etc. The exact nature of funding (equity, loan, grant) depends on the viability or attractiveness of the segment and, to some extent, the type of player (for-profit private, non-profit industry association or non-profit NGO). Over time, the NSDC aspires to create strong viable business models and reduce its grant-making role.

The NSDC is taking equity not as a means to earn money on investment, but as a way to support entities involved in skill creation. When we started this a year and half ago, we put a strategy in place. The strategy has very clear elements: You have people who are below the poverty line and have no access to training centers. You need to make the entire ecosystem inclusive. You need new instruments in the form of educational norms, skill norms and equity participation.

E: How do you make vocational education attractive?
DC: The entire employment scenario in the organized sector is skewed. People perceive vocational education as something you do if you cannot get into a mainstream course. It is believed that a vocational course will take you to a shop floor while a graduation will lead you to a good office. Moreover, the working conditions in many industries are not very conducive for people with vocational training and the pay is not good. All this has to change and people’s perception needs to undergo a change.

E: What are the issues we need to address?
DC: You cannot do anything in a piecemeal fashion. You have to address the ecosystem. Unfortunately we are coming with a lot of baggage and history in the education sector, where private engineering and medical colleges and the entire capitation fee issue spoilt the initiatives. On the political side, we need to settle the profitability issue. Unless we address the entire ecosystem, we will not be able to change this. If you look at the education system and see the huge demand for people who want to be educated and skilled and, on the other hand, industry which needs people, there are many areas where there is no regulation.

These are the areas for private institutions to come up and work in a manner which is profitable and sustainable. The danger is if you have profiteering and people just want to make a quick buck, you will see a whole set of new regulation and caps being applied.

A new breed of social entrepreneurs is needed to transform the entire space as, by 2022, we would be the human capital of the world. Everyone will be looking to us for talent and we can transform the dream into reality if only we manage to focus on education in a much more sustainable manner.

©Entrepreneur June 2011

Tags:
ba, business, centrum, dilip chenoy, education, engineering, ma, Mtech, national skill development corporation, NGO, nsdc, pratham, vocation