Friday, November 30, 2007

Scary facts about India's skill gap

Quite a few Indian companies have no option but to import people for even blue-collar jobs. Here are a couple of examples: DLF Laing-O'Rourke is planning to bring over 20,000 carpenters and electricians from West Asia for its projects in India. Reliance Industries is using 40,000 blue-collar workers from abroad for its Jamnagar project work.

Totally, therefore, India has about 6 million people who would benefit from skill and vocational training every year (after the current backlog of 82.5 million is trained). Assuming similar employability profiles of the new entrants each year, the country's training bill would be around Rs 36,000 crore (Rs 360 billion) per annum. The calculation is simple.

TeamLease says since 82.5 million of the current employed or unemployed require Rs 490,000 crore for training and skill improvement, six million new entrants are likely to require Rs 36,000 crore.

Though the training bill is substantial, it does have a sound economic as well as social logic. Take the training bill of Rs 490,000 crore over two years for the current 82.5 million people.

TeamLease says spending that amount (10 per cent of GDP) will yield an extra income of Rs 136,000 crore (Rs 1,360 billion) annually, everything else remaining the same. Assuming a discount rate of 8 per cent, this translates to Rs 1,751,487 crore (Rs 17,514.87 billion) of additional income (about 61 per cent of GDP) generated over the lifetime of the current crop of employable/unemployed youth. That's a return of over 600 per cent on the investment.

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