In the previous article, we highlighted the key agenda of the 2019 World Economic Forum meeting revolving around the fourth industrial revolution. We argued that the critical challenges for India, in the coming decade, will be reskilling its labor force, making its firms competitive and ensuring sustainability. With the WEF meeting over, this piece highlights key discussion points which took place at the Davos and hold importance for the Indian context.
Indian universities are churning out graduates at a faster pace than ever. But at the same time, employers are finding it hard to fill job positions with suitable candidates. A recent report found that 56% of employers in India find hiring risky and expensive because applicants lack the required skill-set. This problem is not restricted to a few industries or professions.
It is a problem across all the fields, from sales representatives to engineers, professionals to technicians. It is also not limited only to small and medium organizations, but large companies find hiring challenging as well. Lack of previous work experience in the applicant pool, the classic chicken or egg problem, is also a major reason for failed employee searches.
To reduce this talent gap, discussion at the WEF argued for close collaboration between educational institutions and employers, and institutionalization of internships. Currently, the curriculum at universities is far-removed from skill requirements in the professional career. Companies are forced to provide their own on-the-job training which burdens their resources. More importantly, new employees get bound in long-term contracts which might be less than ideal for them.
Collaboration between industry and educational institutions can bring curriculums which are practically useful, are kept up to date and solve the talent gap.
To address the chicken and egg problem of work experience, perhaps lessons from other countries might be helpful. For example, Canadian government provides tax credits to firms which allow apprenticeship or summer jobs opportunities for students.
Internship opportunities exist in Indian companies too. However, they are fewer in numbers and often not structured to provide maximum learning. Institutionalization of apprenticeships would require creation of specific programs in the company with clearly defined tasks and learning outcome for the apprentice. As LinkedIn’s Workforce Report (2018) highlights, enactment of Apprenticeship (Amendment) Bill, 2014 improved payable stipends to apprentices, now the government must further fund and support apprenticeships using existing National Vocational
Education Qualifications Framework (NVEQF), and the National Skills Development Corporation (NSDC).
Several local and unique Indian solutions are already working as well. Barefoot college is successfully providing skills to women for operating their own medium or small enterprise. Such local solutions need broader application across the country and among all age groups.
Such an ecosystem of skill addition can be supported further by MUDRA loans which target micro units. Easier availability of Mudra loans after completion of skills development programs, would increase the success rate of Mudra loans and would also incentivize skills accumulation. Lessons must be learned from European COSME (Competitiveness of Enterprises and Small and Medium-sized Enterprises) program on inducing innovation and reducing financial risk.
On the competitiveness of firms, a WEF’s report finds that despite being the third largest consumer market in the world, India lags behind many smaller countries on quality of research publications, patents, and overall business dynamism. China, on the other hand, leads the world on ICT adoption, institutional capabilities, and innovation.
This difference is apparent in Research and Development (R&D) investments. India invests only around 0.8% of its total GDP in R&D activities, with per capita R&D investment about eight times smaller than China or Malaysia.
The discussion at WEF highlights critical policy requirements for India to increase competitiveness, the most important of which is expanding R&D capabilities through government funding to universities and research centers.
To begin with, the focus could be on emerging products like batteries, efficient solar panels, wind-turbines, healthy and environmentally safe food processing.
In state run organizations, public procurement process is vastly inefficient compared to private organizations. Public sector organizations undertake most of the extraction of fuels, food-grain management and high-tech weapons R&D. Inefficiencies in procurement processes hampers India’s capability in food, energy and national security.
Recent investments made by the government in data management must be extended to public procurement process that needs overhauling. It needs more data analytics and greater transparency such that the information assymetry between public procurement agencies and private players is eliminated. This will reduce the corruption, time and cost of procurement.
Finally, the major challenge affecting India is poor environmental conditions and lack of sustainability. Ideas such as circular economy, waste management, transmission infrastructure for solar and wind energy were discussed at WEF and also in our previous article.
What was missing from the discussion at Davos was discussion on water shortages, which is a global problem, from California to Australia, and only going to become worse with climate change. Global warming will cause much longer droughts and more disastrous floods in India.
The scarcity of water will be unusually severe in Northern India, where decades of groundwater extraction by the agricultural has depleted aquifers. The shortage is already quite severe in several parts of India.
In Bengaluru’s Silicon Valley, swanky high-rise office complexes of major tech multinational firms wait every morning for water tankers to arrive and fill their underground reservoirs.
Tackling the water scarcity challenge requires a major overhaul of existing leaky infrastructure and construction where the infrastructure does not exist. More importantly, water consumption is agriculture needs to be regulated, which has available technological solutions but requires strong political will to undertake.
To summarize, technological advancements made by India in the last two decades have made available range of solutions to deal with current and future challenges. It is time for prudent policy making to ensure the success story continues for the next two challenging decades.
(Dr Anirudh Agrawal is part of International Research and Analytics team at Frankfurt School of Finance & Management, while Dr Ashish Tyagi is a postdoctoral researcher at Frankfurt School of Finance & Management.)