Crisil SME Tracker: Incentivised SMEs can help bridge India's skill deficit

Availability of skilled labour is critical for Indian SME exporters to be productive and competitive

CRISIL believes subsidising and incentivising credible small and medium enterprises (SMEs) to undertake skill development training programmes can help narrow India’s yawning skill deficit. 

As things stand, less than five per cent of the country’s workforce possesses formal vocational skills. 

In the context, engaging SMEs in skill development can offer two major benefits “it can boost the effectiveness of the government’s Skill India initiative and also improve the competitiveness of the SME sector, which is India’s second-largest employment generator. 

The government-empowered National Skill Development Corporation has adopted a public-private partnership model to promote skill development, by catalysing the creation of large, high-quality and for-profit training institutions, as well as funding, in order to build scalable and profitable vocational training initiatives. Several measures have also been taken to strengthen the accountability of the training partners involved in these skill development programmes. 

Some of these measures, such as suspension of non-compliant TPs/ training centres, rationalisation of soft loan disbursements and placement-linked payouts, have led to a consistent rise in the number of candidates trained are from 10 lakh in fiscal 2014 to 16 lakh in fiscal 2017. 

However, placement of the candidates so trained remains less than encouraging. CRISIL believes subsidy funding for SMEs that impart training at their facilities will not only help them access low-cost finance but also strengthen their infrastructure. This, in turn, will lead to the creation of a pool of skilled labour for the SMEs, and industry at large, to tap. 

Availability of skilled labour, in addition to technology, is critical for Indian SME exporters to be productive and competitive vis-a-vis their global counterparts. For the semi-skilled workforce already employed in manufacturing and service-oriented SMEs, measures should be taken to enrol workers in these subsidised skill-training programmes without loss of daily livelihood.