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Skilling And SME Are At The Heart Of A Digital Recovery

The success of digitally-empowered SMEs stands on essential pillars of technology adoption and infrastructure, access to the right skillsets, finance and policy push.

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India’s macro-economic environment is changing rapidly, and this accelerated digitalization is bearing its effects on the SME (small and medium enterprise) sector as well. However, for the SMEs the new normal will not be just about survival, but an opportunity towards becoming agile and resilient in order to scale up and grow faster.

A fundamental focus towards driving economic growth and developmental initiatives, include the need to generate more jobs and sustainably multiply income. According to experts nothing short of a revolution is required in the skilling and the vocational education space in India, which has assumed critical propositions and might well determine the future growth of this country.

The success of digitally-empowered SMEs stands on essential pillars of technology adoption and infrastructure, access to the right skillsets, finance and policy push. In order to make use of these productivity-focused technologies, new-age solutions and benefits, we have to be ready with the know-how and leverage the levers that we have to our disposal.

With the now famous, demographic dividend, comes the big responsibility of providing employability to millions of youth from this country. Two reasons why this looks possible: One, India is turning out to be a high growth market – which will need employment in a big way. Two, with an ageing world population, young India has an opportunity to be the global supplier of manpower.

In order to be able to cater to this demand we need to have a mature skill ecosystem in place, and a strong intent from the government to get all stakeholders aligned to this new ecosystem. This is the reason why the policymakers and the industry leaders need to map India’s skill requirement with the country’s micro, small and medium enterprises (MSMEs). There are about 30 million small, micro, and medium enterprises in India, that contribute to half of India’s factory output, 45 per cent of exports and employ more than 60 million people (India’s organized service sector employs about 33 million). About 8 per cent of India’s GDP is accounted by small enterprises.

If the 1980s was about seeking jobs in the public sector, the 1990s and the first few years of the new millennium were about jobs in the private sector. This could well be the decade of entrepreneurship.

The unorganized nature of the segment is the key challenge to reach out to these entities. The ministry of Micro, Small & Medium Enterprises (MSME) puts the overall number of MSME at 13.1 million.

It is also estimated that by 2022, India will have the maximum number of working age population in the world (population between the ages 15 to 59) who could contribute to the economic growth of the nation. According to estimates 40% (about 224 million) will be employed in agriculture, 29% (about 162 million) will have to be engaged in industry and 31% (about 173 million) will have to be employed in the services sector. For the economy to grow at 8% to 9%, it is essential that the manufacturing and services sector grow at 10% to 11%, assuming agriculture grows at 4%.

In such a scenario, it is obvious that a large portion of the workforce would migrate from farms (agriculture) to factories and service firms. However, the skill sets that are required in the manufacturing and service sectors are quite different and this scenario necessitates skill development in the workforce.

India, therefore, will need to be home to an estimated skilled workforce of 500 million by 2022. About 12 million join the workforce every year. This talent pool needs to be adequately skilled. There are examples from the world that India can tailor to local needs. For example, Vocational Education Training (VET) is regarded as the pillar of the educational system in Germany. Two-thirds of young people undergo vocational training in the dual system. It is described as a ‘dual system’ as training is carried out in two places of learning: at the workplace and in a vocational school. The National Skills Recognition System (NSRS) is Singapore’s national framework for establishing work performance standards, identifying job competencies and certifying skills acquisition. This has helped the industry train skills-standards consultants and assessors, as well as to develop On Job Training (OJT) blueprints for the skills-standards established.

In sum, for India, the focus has to be on innovation. Young professionals today will not do a ‘normal job’; with the onset of the Gig Economy, rise in specialization and niche skills, it is critical that we allow our young professionals the freedom and proclivity to experiment, to ask questions and to create an environment conducive to imbibing critical skills for the future. The millions who join the workforce every year need to be appropriately skilled to enable India’s MSMEs to absorb them and accelerate the journey towards a $5 trillion GDP goal.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Jagdish Mitra

Chief Strategy Officer & Head of Growth, Tech Mahindra

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