NCAER Reports Rise in Skilled Workforce

Syllabus: GS3/ Economy

Context

• The National Council of Applied Economic Research (NCAER) released the report “India’s Employment Prospects: Pathways to Jobs”, Underlining the role of skilling and small enterprises as key drivers of job creation in the country.

Key Findings of the Report

• Employment Trends: India’s self-employment dominance is due to economic necessity rather than entrepreneurial dynamism as most of the small enterprises function at subsistence level.
• Workforce Composition: India’s workforce could benefit greatly from upskilling, particularly with the advent of new technologies and AI.
  • Medium-skilled jobs dominate employment growth, especially in services, whereas manufacturing remains low-skill intensive.
• Increasing the skilled workforce share by:
  • 9 percentage points could generate 9.3 million jobs by 2030.
  • 12 percentage points could raise employment in labour-intensive sectors by over 13% by 2030.
• Role of Small Enterprises: Productivity of India’s smallest enterprises is central to the country’s employment future.
  • Enterprises using digital technologies employ 78% more workers than non-digital firms. A 1% increase in access to credit raises the expected number of hired workers by 45%.

What are the Challenges?

• Informal enterprises dominate India’s economy, especially Own Account Enterprises (OAEs) that do not hire workers.
  • A 10% increase in GVA in informal enterprises can lead to a 4.5% rise in hired workers.
• Low Coverage of Formal Training: As of 2024, only 4.1% of India’s workforce had received formal vocational training. 
• Structural Problems in the Skilling System: 
  • Training courses are poorly aligned with industry needs.
  • Many training centres suffer from low seat utilisation.
  • Placement outcomes remain weak.
  • Limited coordination between industry, training providers and state governments.

Key government Initiatives 

Policy Recommendations Highlighted in the Report

• Reforming the Skilling Ecosystem: 
  • Shift from supply-driven training to demand-aligned skilling.
  • Strengthen industry participation and placement-oriented outcomes.
  • Increase public investment in vocational education.
• Demand-Side Employment Strategy:
  • Prioritise labour-intensive manufacturing sectors such as textiles, garments, footwear, and food processing.
  • Align industrial incentives with employment multipliers rather than output alone.
• Boosting Informal Sector Productivity:
  • Expand access to formal credit for small and micro enterprises.
  • Promote digital adoption to improve productivity and hiring capacity.
  • Enable enterprise graduation from subsistence to growth-oriented models.

Source: AIR