Inside India

India needs more skilled manufacturing workers

This past year, total enrollment in a higher education program in India reached a record 41 million students, of which about 32 million were undergraduate students. This means every year, India’s education system churns out millions of fresh white collar workers in search of an office to start their careers.


Do you know what India’s education system does not churn out much of? Well, veterinarians, nurses, plumbers, machine operators, carpenters, and many more professionals that are becoming sorely lacking in India’s growth story. For instance, on any given year, there are about 3,000 new veterinarians, looking at the prospect of managing about 300 million cattle, amongst other animals.


More related to the prospect of India’s economic growth, there is a huge gap in the supply of skilled manufacturing labor. A report by the National Skill Development Corporation found that while the demand for skilled workers reached 109 million in 2022, the supply was only about 80 million. So we have a country with a growing working-age population and a continuous GDP growth and yet close to half that population is unemployed and factories (and infra projects, and construction) cannot find enough workers to satisfy demand. What is the problem then? In essence, it is about a growing workforce that is not skilled enough or motivated enough to take up those available jobs.


The sector in India that employs the most people is agriculture. More than half the working-age population is employed/self-employed in a farm. It is mostly a low efficiency small-scale low-technology labor-intensive kind of work, which does not require any particular skills on the part of the laborers. So for many people to switch from a farm to a factory there are two considerations. First, they would have to learn new skills and that might have a significant cost for them (basic courses, certifications, time spent learning and not earning, etc). Second, the factory job should offer a significant financial improvement. That is likely true but the improvement gets diluted by the farm subsidies that the government has traditionally offered. These are subsidies that cannot be taken away easily, since the subsistence of farmers depends on them but they certainly act as an additional deterrent from switching. If a small farm and the basic livelihood of a family of farmers can be sustained through a subsidy, the motivation to seek another path full of risks and uncertainties does not look appealing.


Therefore, two things become critical to close the skilled manufacturing worker gap and unleash the growth in manufacturing. First, to provide an educational system that can churn out workers with the right skills. Second, to use incentives to encourage that shift from agriculture to manufacturing.


India’s educational system has been heavily focused on two things. One, generating college students that go on working mostly in the service industries. For example, the IT industry story is remarkable, when Indian schools created the right programs to skill generations of white collar workers that were the basis of Indian IT companies’ competitive advantage. And two, expanding basic literacy in the largest part of the population that go on working in agriculture, with great success in recent times. The problem is that there is nothing substantial in between those two. No vocational training, no manufacturing skills, no path to a middle-class life working in a factory or in a construction project.

So what needs to change?

In my opinion, nothing will significantly change if the opportunity does not look good enough. It would be useless to spend billions of rupees in upskilling courses and new schools if ultimately the manufacturing job in India does not get more appealing. For example, the current labour laws discourage the hiring of permanent workers (because once it is done, they are very difficult to fire), thus lowering the attractiveness of the job. That should change. And salaries and benefits should go together with that. In fact, in the coming years manufacturing companies will have a good chance to make their jobs more financially attractive thanks to the fast-growing demand.


Once the manufacturing job is made attractive, people will take up skilling at the right cost and this is where the educational system also needs some changes. I believe that the current system of universities and professional schools is ill-designed to take up the task. It has to be an effort driven by the corporations that so desperately need that labor supply, in partnership with a number of schools. Corporates can move (and spend) faster to design and deliver the necessary training. Tata wants to manufacture chips? Let them set up a training system, since they have the money, the resources (corporate universities) and the incentive to get it done. Boeing wants to manufacture rocket components in India? Ask them to bring enough specialists to train 3-4 times the number of workers that they require. Sure, they are making an effort that other companies will benefit from and for that the government can give them extra help (tax breaks, etc) if needed.


There is simply no time to re-design, re-organise and certify an entire country-wide system of vocational education. Though that can be done in parallel and with a long-term horizon, it cannot be the main approach to the problem. The main approach again should be a sort of smaller-scale proof of concept involving corporates and selected schools that can solve more immediate needs while providing the prototype for a future larger-scale model.


There is an additional element that should be part of this model, which is the role of edtech in this skilling system. I find it sad to some extent that the biggest edtechs in the country are entirely focused on test coaching (part of getting in a good college or post-graduate program or, especially, a government job). It’s like the best minds of the digital education world are focused on solving the past. India does not need more or better competitive test-taking. Years ago, it was important to make this test coaching reach all corners of the country at low cost to enable certain groups of students to access high-quality programs and jobs. But that is largely done, edtech startups investments should be looking at the next problem. And here is where corporate money can also help in involving those startups in the upskilling efforts.


Once all this is in place and the model is refined and expanding, the cultural view on manufacturing and certain professions will also change. It is a fact that every child with the possibility to get a college education is being heavily encouraged to do so and likely to study engineering, commerce, law or medicine. That is it. The prospect of a career as a plumber or a contractor or a machine operator or a nurse is not in anybody’s mind if the college possibility is there. This has pernicious effects. Too many college graduates that are unemployable, too many universities of low quality that profit from the need to get a degree, etc. This will take a lot of time to change but it should happen only if a career in those professions becomes attractive.


The time is short if India is meant to take advantage of favorable winds in global markets. A growing and skilled manufacturing force is a must.