India Faces Skill Deficit: Industries Adapt through Managed Training Services and Apprenticeships
Source and Citation: Excerpts from “Navigating Future of Skill Development and Job Creation” published in The Economic Times on January 27, 2024.
Analysis of this News for a Layman
The article addresses India’s urgent need for skill development to enhance employability, particularly among the over 800 million individuals under 35 years of age. Currently, only 5% of this demographic has received formal skills training, and the conventional graduate education system often falls short in preparing individuals for job roles.
Industries are responding to this challenge by collaborating with training providers to offer managed on-the-job skill-building services before hiring. Sectors such as retail and hospitality are providing tailored training lasting from 15 to 60 days for new hires, while infrastructure projects are implementing programs that span months to years due to the specialized engineering roles involved.
Apprenticeships, mandated by the government, are gaining wider adoption, with some white-collar fields offering stipends exceeding ₹50,000 per month. Studies indicate productivity gains of 20-25% from skilled talent, and there is a growing demand for a blend of technical expertise and soft professional skills as technology continues to impact various roles.
Impact on Retail Investors
For stock market investors, this underscores the risks associated with skill deficits faced by major employers across various sectors. However, the adoption of managed training and apprenticeship measures indicates the development of adaptable capacity-building frameworks.
Leading staffing sector firms like Quess Corp and TeamLease Services, providing customized training, are poised to benefit. Their multi-year corporate tie-ups may provide stable revenue visibility, and investors can assess the impact on training-linked revenue contributions.
In the medium term, this approach helps mitigate immediate wage inflation or attrition risks as talent bench strength improves. In the long term, it signifies positive structural efforts to address skill imbalances, especially relevant for sectors facing talent supply gaps.
Impact on Industries
Industries most impacted are those undergoing rapid technological changes, such as banking, insurance, retail, automotive, electronics hardware, and telecom. Talent demand-supply gaps are emerging as available skills lag behind the pace of digital transformation.
Second-order beneficiaries include vocational training partners, industry certification providers, and skill-based online hiring platforms. Educational institutions need to adapt their curriculum to accommodate the blurring lines of skill specializations.
However, industries requiring deep trade-specific skills, such as infrastructure projects and manufacturing, continue to rely on hands-on apprenticeships. Therefore, training formats and platform investments need to align across this spectrum.
Long Term Benefits & Negatives
In the long run, the broadening of talent re-skilling and apprenticeship culture can enhance the fluidity of India’s labor markets, reducing transition friction between academic environments, the informal sector, and the formal economy.
This approach benefits industries facing frequent disruptions, fostering specialized competencies without multi-year gaps. However, key risks include the pace and format of change, potential employer biases towards certain skill-building pathways, and responsible support for those facing large-scale redundancies.
Short Term Benefits & Negatives
In the near term, businesses grappling with digital gaps and talent scarcity experience immediate relief through managed, on-demand training models. However, smaller firms may struggle to fund dedicated training teams and infrastructure, and high apprentice stipends can impact cash flows before productivity gains materialize.
For industries as a whole, structured evaluations regarding emerging specialty jobs, transition support for redundant roles, and uniform frameworks for portable certifications will take time. Skill-based hiring visibility also needs better technology integration.
While near-term relief comes through prioritized in-house centers of excellence, there is a need for broader efforts across talent delivery pipelines in the long term.
Companies Impacted by the Future of Skill Development and Job Creation
Indian Companies that will gain:
- Mahindra & Mahindra: With their diverse portfolio across automobiles, IT, and infrastructure, Mahindra stands to benefit from the need for both reskilling and new talent in sectors like EVs, robotics, and data analytics. Their focus on OJT and apprenticeships aligns well with the article’s recommendations.
- Tata Consultancy Services (TCS): As a leading IT services provider, TCS will see increased demand for their training and upskilling programs for existing and new employees. Their investments in AI and ML align with the projected job growth in these areas.
- Apollo Hospitals: The booming healthtech sector will need trained professionals, creating opportunities for Apollo Hospitals. Their expansion plans and focus on digital healthcare delivery position them well to capitalize on this trend.
- Bajaj Finserv: The rise of fintech and the need for financial literacy will benefit Bajaj Finserv. Their strong brand and extensive reach can be leveraged to provide skill development programs in financial services.
- Byju’s: The emphasis on early exposure to technical and soft skills creates an opportunity for Byju’s to expand beyond traditional education into skill development for high schoolers and beyond.
Potential Market Sentiment: Positive for these companies due to their alignment with the future of skills and their existing strengths in relevant sectors. Increased investment in training programs and expansion into new skill areas could boost growth and stock prices.
Indian Companies that might lose:
- Traditional Manufacturing Companies: Companies reliant on unskilled labor could face challenges finding employees as the focus shifts towards skilled jobs. Automation and increased competition from skilled workforces in other countries could further impact them.
- Universities focused solely on theoretical education: The move towards skill-based education may lead to reduced enrollment in traditional academic programs, impacting revenue and reputation. Adapting curricula and collaborating with skill development providers could be crucial for survival.
- Recruitment Agencies focused on traditional methods: The rise of alternative recruitment models like ‘try and buy’ and government-mandated apprenticeships could disrupt the traditional agency business model. Adapting services and focusing on niche skill placements could be key.
Potential Market Sentiment: Negative for these companies due to potential revenue decline and outdated business models. Failure to adapt to the changing skill landscape could lead to decreased investor confidence and stock price drops.
Global Companies that will gain:
- Coursera, EdX, Udacity: Global online learning platforms can benefit from the increased demand for online skill development programs in India. Their diverse course offerings and partnerships with Indian universities could further their reach.
- Microsoft, Google, AWS: The growing need for AI/ML and data analytics skills opens doors for these tech giants to provide training programs and cloud-based solutions to Indian companies.
- ManpowerGroup, Kelly Services: Global recruitment agencies with expertise in skill-based hiring and training could see increased demand from Indian companies seeking skilled talent.
Potential Market Sentiment: Positive for these companies due to the expansion of their addressable market and potential revenue growth in India. Continued innovation and localization of training programs could further fuel their success.
Global Companies that might lose:
- Traditional textbook publishers: The shift towards online learning and skill-based education could pose a challenge for traditional publishers. Adapting content and developing digital learning platforms could be essential to stay relevant.
- Companies reliant on cheap, unskilled labor: As India’s workforce becomes more skilled, the cost advantage of outsourcing some types of work may diminish, impacting companies dependent on such practices. Diversifying production locations and focusing on higher-value activities could be necessary.
Potential Market Sentiment: Negative for these companies due to potential loss of market share and decreased profitability. Failure to adapt to the changing global skill landscape could lead to financial losses and decreased investor confidence.
Remember, this is just an analysis based on the provided information. It’s crucial to conduct further research and consider broader market factors before making any investment decisions.