Vocational

Education
in India:
Key
Challenges
& New
Directions
Introduction 74

Opportunities in Vocational
Education 76

Challenges for the VET Sector 80

The Road Ahead: Key Policy

Initiatives 81
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Introduction
Since the opening of the economy in the early 1990s and the subsequent evolution of India into a knowledge-
based economy, the demand for higher levels of specific skills has been constantly increasing. Availability
of skilled manpower is a critical success factor for driving the services sector, which in turn fuels the
development of a knowledge economy. To become a superpower in the true sense, India needs to have a
huge base of skilled manpower. This is essential to match the ever growing demand of modern industries
where services predominate over agriculture or manufacturing. It is in this context that vocational education
and training assume greater significance.

Current Scenario in Vocational

Education
What is Vocational Education?
According to the Team Lease Labour Report, 2007, ‘Vocational education can be broadly defined as a
training program, which prepares an individual for a specific career or occupation’.

The key objective of vocational education is to help develop individuals’ skills in very specific fields by
giving them applied or concrete experience in specific vocations or trades. This not only makes them
employable but also helps create opportunities for entrepreneurship.

The incidence of higher education is very low in

India because of the poor education infrastructure. Exhibit 1:
As per the 61st round of NSSO (see Exhibit 1), the Education Profile of Indian Population
80
percentage of population that completed primary
70
education was 70 per cent, but less than 10 per
cent go on to complete a graduation course and (All figures in %)
55

above.
35

This huge drop-out rate is largely due to reasons 20

ranging from accessibility to affordable education 6 6
to low perceived short-term benefits, to household
Graduation Completed Completed Completed Completed Completed All
circumstances that demand immediate employment & above Diploma Higher Secondary Middle Primary Literates
for the students. Driven by the urgency to start Secondary

earning at a younger age, most Indians resort to Source: NSSO, 61st Round
acquiring employable skills informally in a trade that
gives them very low income. This has resulted in a Exhibit 2:
huge shortage of a skill-trained workforce in India. Incidence of Vocational Training

The 61st round of NSSO further suggests that 2 1

4
almost 97 per cent of individuals in the age bracket (All figures in %)

of 15–60 years have had no exposure to technical

No vocational training
education, which is another indicator of low skills Received formal vocational training
sets among Indians. The other mode of acquiring Received informal vocational training
employable skills sets is by vocational education, 93 Receiving formal vocational training
and the numbers here, too, are not at all encouraging.
The demographic pattern of the country indicates
that close to a third of the population of India are Source: NSSO, 61st Round
young people in the age band of 15–29 years. Of
this population, only 7 per cent have received any

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form of vocational training. Further, of this 7 per cent, only 2 per cent have received any form of formal
vocational training. As seen in Exhibit 2, according to the occupational profile of India’s workforce, 90 per
cent of the workforce population is employed in skill-based jobs, whereas more than 90 per cent have not
had any kind of exposure to vocational education or training.

Exhibit 3: Incidence of Vocational Education and Training: Difference in Urban and Rural India

(All figures in %)
7
6

3
3
2 2 Total
2 Urban
1
0.6 Rural

15-19 years 20-24 years 25-29 years

Source:penetration
Poor NSSO, 61st Round
of vocational education and training is not restricted to rural areas alone. It is also low in
urban areas where there is a higher installed capacity to impart vocational education and training.

Soures of Vocational Education

Skills in India are largely acquired through two main sources: formal training centres and the informal or
rather, the hereditary mode of passing on skill sets from one generation to the next. Formal sources are
largely channelised through the mainstream education system, under the ministry of HRD, through training
institutions outside the purview of school and university schemes and also through polytechnics which offer
various diploma courses.
Exhibit 4:

Vocational Education and Training In India

Type of Source
Mainstream education System
Training institutions outside the
school and university systems
Diploma level
Source: Knowledge Commission Report
Institute
Centrally Sponsored Scheme of
Vocationalisation of Secondary
Education run by the Ministry of
Human Resource Development
Industrial Training Institutes
(ITIs) and Industrial Training
Centres (ITCs)
Polytechnics
Capacity
Enrolling less than 3 percent of
students at the upper secondary
level
Total seating capacity of 785,000
1,244 polytechnics run by MHRD
with a capacity of over 295,000\
Quantity
9,583 schools offering about 150
educational courses of two years’
duration
5,488 public (ITI) and private
(ITC) institutions imparting VET,
of which 1,922 are ITIs and 3,566
are ITCs
1,747 AICTE-approved diploma
programs with 294,370 seats

As the above table indicates, there is clearly little capacity for imparting vocational education in India. It is
also an established fact that, of the total capacity available, the capacity utilisation is quite poor. This has
actually led to a huge mismatch in terms of demand and supply for a skilled, trained workforce.
Exhibit 5: Exhibit 6:
Seat Utilisation in ITIs Seats Utilisation - Technician, Trade
(All figures in %)
and Graduate Apprentices
Seat
51 utilisation 70
against
59 (All figures in %)
sactioned
24 25 strength
in ITIs
22

Under Full Over Technician Trade Graduate

utilisation utilisation utilisation apprenticeship apprentices apprentices
Source: FICCI Survey, 2006 Source: Annual Report 2002–03, Ministry of Labour, Govt. of India

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Exhibit 5 makes it clear that more than half of the available seats remain unutilised, which is another reason
for the mismatch in demand and supply for skilled workforce. Given the rate at which the economy and
the youth population of the country is burgeoning, if the current shortfall is not met in terms of developing
a more skilled workforce, we run the risk of high unemployment which would, in turn, adversely impact the
fortunes of the country.

Vocational Education: Current and Future Market Potential

The current size of vocational education is estimated Exhibit 7:
at US$ 1.4 billion and is expected to grow to US$ 5.8 Growth In Vocational Education and Training
(in US $ billion)
billion, a CAGR of 15.3 per cent.
5.8

It is estimated that 90 million jobs will be created over

the next five years, of which almost half (45 million)
2.9
are expected in the services sector. Of these, an
estimated 7-10 million are expected to be created in 1.1
hospitality, healthcare, and modern retail alone. Of
these new jobs, more than half would require some
2008 2013 2018
form of vocational training. Source: Technopak analysis, Company websites, published articles

Opportunities in Vocational
Education
India’s Education Market
India is emerging as one of the world’s largest Exhibit 8:
consumers of education services with a target Education Expenditure as Percentage of GDP
population of close to 450 million (in the age band of
UK 5.0% 1.2%
5-24 years). This number is expected to increase to
486 million by 2025, exceeding the combined target USA 4.8% 2.3%
population in China (354 million) and US (91 million).
India 3.5% 4.0%
In India, public and private spending aggregates
to approximately US$ 100 billion per annum and Russia 3.8% 2.3%
private spends on education have grown at a CAGR
China 3.8% 1.3%
of 10 per cent since 1994. In fact, compared to
other developed countries, private spends in India Public Private
are relatively higher (4 per cent of GDP, as seen in Source: National Bureau of Statistics of China, 11th Five year Plan (Govt of India),
Exhibit 8). OECD

India’s economy has witnessed continuous positive growth, which has led to a huge demand for a
workforce in India. Recent economic surveys show that employment growth has been the largest in the
Services sector, and this trend is in all likelihood going to grow in the future. Also, technological product
and service innovations have fuelled the demand for more skilled workers. This demand has not been
met, due to unavailability and poor quality of skilled workers. There is a lack of training facilities and skill
development in as many as 20 high-growth industries such as logistics, healthcare, construction, hospitality
and automobiles. Exhibit 9 shows the split of people intake over the next 5 years (2008-13) by different
sectors.

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Exhibit 9:
Job Creation Over the Next Five Years

1.8 0.4 (All figures in %)

People intake over the next 5 years = 90 million
3.3
3.8 Construction
4.2
Wholesale trade
5.6
14 37.8 Community Service
Service 5.8 IT/BPO
51 Manufacturing
6
Banking & Insurance
35
Agriculture Hotel & Restaurant
6
12.7 Public Admin & Defence
12.7
Communication

Source: Talent for Services Sector, Boston Consulting Group and Technopak analysis

India has roughly close to 5,500 public (ITI) and private (ITC) institutes as against 500,000 similar institutes
in China. As against India’s 4 per cent formally trained vocational workers, countries like Korea or even
Botswana have a 96 per cent and 22 per cent vocationally trained workforce respectively. This does lead
us to believe that there are tremendous opportunities for vocational education and training in India. These
opportunities favour the organisations willing to enter the vocational education market as well as the
students wanting to take up vocational courses to increase their employability.

Initiatives Taken in Vocational Education and Training in India

Government Initiatives
Interestingly, the highest growth rate is being witnessed in vocational education in India, growing at
almost double the rate of the K-12 education segment. The Government, too, has realised the potential of
vocational education and training and has listed it as one of the priority areas in its 11th five-year plan. As
per the VET framework suggested by the government, VET had an outlay of more than US$ 1 billion. The
Central Government has launched a mission on vocational education and skills development. It plans to
set up more than 1,500 new ITIs and polytechnics, 10,000 new vocational schools and 50,000 new skill
development centres across the country.

As per government’s plans, of the 15 million students who need vocational education every year, about
5 million students would be provided initial training by strengthening existing VET Institutions and setting
up new VET Institutions. The remaining 10 million students would be trained through non-formal/informal
mode. The Government also plans to encourage the participation of the private sector and NGOs in a
number of areas such as improvement of facilities and resources of VET institutions/centres, development
of skills/standards, training packages, competency-based curricula and instructional materials, conducting
tests, and providing joint certification. It wants to take up the accreditation of private VET providers (schools,
colleges, universities, industry and community organisations) for quality assurance and uniformity in skills
development. On an average, the government has earmarked an expenditure of roughly US$ 104 per
person for imparting training and certification through the private sector.

Private Players in Education

Since the VET segment of education is not regulated, profit-making is allowed. With no controlled fee
structure and limited mandatory recognition (except for ITIs and polytechnics), it has received huge interest
from private players. One of the biggest success stories of private players making it big is that of Educomp
Solutions. Educomp started its operation in 1995 as a computer service provider to schools, and now
operates along the entire range of educational services, from ICT to e-learning and additional learning
resources, content development and teacher training, and is now aggressively moving into actual school
management and services. This success is strongly reflected in the share price of the company where its
market capitalisation has increased 14 times (US$ 104 million to US$ 1458 million) in just two years. Other
players like NIIT, Aptech, Everonn and Jetking too have their own successful business models. It is not just

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the IT and ITES sectors that have seen an influx of private players. This trend is also visible, though limited,
in sectors like aviation, hospitality, retail management etc.

Corporates’ Individual Initiatives

Across business sectors, companies and industry bodies are not only beefing up their in-house training
facilities, but also developing initiatives to make potential employees job-ready even before they enter the
organisation. Some key measures include:
• Hiring of skilled labour from outside the country
»»A leading infrastructure development conglomerate, DLF Laing-O’Rourke is planning to bring over
20,000 carpenters and electricians from West Asia for projects in India.
»»India’s largest private sector company, Reliance Industries is using 40,000 blue-collar workers from
abroad for its Jamnagar project.
• Creating in-house training facilities
»»Bharti Group has created Bharti Resources, its own training and development company.
»»Wipro spends 1 per cent (capital expenditure costs not included) of its revenue on training 14,000 fresh
graduates a year over a period of 12-14 weeks.
»»Wipro launched ‘Mission 10X’ on Teachers’ Day: a non profit programme aimed at enhancing
employability skills of engineering graduates.

Exhibit 10:
Non-Government Initiatives
Private Sector
Non-Government Organisations
Technical Institutes’ corporate in-house training (e.g. Tata, Infosys,
Education programmes in slums/rural areas, Religious groups
Reliance), Confederation of Indian Industries (CII), Federation of
(sub-contracted to run MES and TECOS by state govts)
Chambers of Commerce and Industry (FICCI)
Source: Company websites and published articles

Based on the trends of employability in the industry, retailing, healthcare, banking and insurance,
construction and hospitality sectors are the key emerging segments.

Exhibit 11:
Manpower Requirements in Key High Growth Services
Additional Direct
Market Size 2008 Market Size 2013 % Population Requiring
Services Sector Employment 2008–13
(US$ billion) (US$ billion) Vocational Training
(million)
Retail 410 535 2 to 4** 90
Healthcare 40 80 3.5 to 4* 20
Banking and Insurance 28 47 3.35 80–85
Construction 71 114 18 30–40
Hospitality 23 39 1.6–2 65–70

*Doctors and nurses estimates of~2million jobs are not considered in this dataset ** Estimated only for organised retail
Source : Technopak analysis, Industry sources

Current Need-gaps in Key Industries:

Retail
There are about 1.6 million people employed in India’s organised retail sector and another 2-4 million new
recruits are expected in the next 5 years. Almost 90 per cent of these are expected to be in front-end jobs
where vocational training is most required. The current in-house capabilities and outside training institutes
are not equipped to impart skills to this large number. The biggest skill-gaps exist in areas such as:
• Sales and customer management
• Store maintenance
• Visual merchandising

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• Merchandise planning
• IT (billing package, merchandise planning tool, bar-codes, etc.)

Construction
The construction industry can be classified into real-estate segment, which is growing at a CAGR of 30 per
cent and infrastructure segment, which is growing at a CAGR of 15 per cent. There is therefore a need to
mobilise manpower for these industries which are growing at a faster rate than the overall economy. The
difference in skill-based manpower within the two segments is:
• Real Estate: It needs a relatively higher number of designers, carpenters, plumbers, electricians, i.e.,
semi-skilled professionals.
• Infrastructure: There is a greater need for high-skilled professionals such as engineers, though the need
for semi-skilled workers such as supervisors, quality controllers, etc. is also significant.

Similar shortages of manpower and a requirement for skilled and trained workers are quite evident in
other key growing sectors as well. In all, it translates into a big opportunity for private players to enter the
vocational education and training segment to cater to the ever-increasing demand for skilled manpower.
Since the government-installed capacity is neither adequate nor fully utilised due to a plethora of reasons,
ensuring private participation in vocational education and training would ensure far greater success in
responding effectively to the needs of the economy.

Developing Public-Private Partnership for VET in India

One of the guiding principles, under which PPP can be developed for vocational education and training,
is the university township model. Under this model, the land for the training institute is made available by
the government, the infrastructure and operations are managed by a private player and the funding is
provided by setting up a corpus of funds or grants by private players, alumni and donors. This not only
helps in imparting international standards of high-quality education but also helps in providing the right mix
of desired skilled workforce.
Exhibit 12:

University Township Under PPP

Land Infrastructure, Operations Funding

Private Players
Government Private Player Alumni
Donors

Salient Features Opportunity Investments

•Land made available by Government
•Same stature as Harvard / Kellogg
•Focus on research and development
•Create funding through corpus and
endowments
•Brand-building for generations
•Imparting international standard
high-quality education
•Create institution to attract talent and
location of business
•Land: 500–700 acres
•Number of graduates: 15,000-17,000
by end of 10 years
•Funding through corpus built by
corporate donors and investors
•Capex (excluding land): US$ 312 million

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Challenges for the VET Sector

Though there is a growing demand for vocationally trained workers, the segment per se has not really
picked up in India because of a variety of reasons.

Current Infrastructural Facilities and Poor Utilisation

The Kothari Commission on Educational Reforms, 1966 had visualised that 25 per cent of students at the
secondary stage would opt for the vocational stream by the year 2000. However, the actual implementation
of the plan has turned out to be quite poor. Less than 7,000 schools have received grants and at present
only about 5 per cent of children in the 16-18 age group are in the vocational stream. Compared to India,
these figures are far higher in not only developed economies but in some developing economies as shown
in Exhibit 13.
Exhibit 13:
International Comparisons on the Size of Vocational–Technical Secondary Education
Vocational–Technical Share (per
Country Secondary Enrolment Ratio No. of Students (’000s) cent of total secondary enrol-
ments)
Russia 88 6,277 60
China 52 15,300 55
Chile 70 652 40
Indonesia 43 4,109 33
Korea 93 2,060 31
Mexico 58 – 12
Malaysia 59 533 11
South Africa 77 – 1
Source: World Bank Report

More recent information suggests that the enrolment figure is less than 3 per cent of the students attending
Grades 11-12. The weighted average capacity utilisation of the schools receiving grants is less than 50
per cent. This implies that the 350,000-400,000 students enrolled in vocational education comprise 3 per
cent of the 15 million students or more in Grades 11 and 12. Thus, what it eventually means is that less
than 1 per cent of students who had entered Grade 1 over the last decade or so would have eventually
participated in vocational education. It is also widely recognised that the existing student capacity in ITIs/
ITCs largely goes unutilised.

Societal Pressures
Historically, social stigma has been attached to vocational education and training as manual or industrial
jobs were perceived as low paying and meant for low-caste communities. Largely because of this, students
who completed their higher secondary education were more inclined towards academic or professional
courses. Due to this attitude, the vocational education and training segment has suffered from poor
enrolment.

Training of Trainers
Good trainers have always been an issue with vocational education in India. Because of societal pressures,
the segment has failed to attract good mentors. Teachers in general are poorly paid in India and the
salaries of teachers in VET have been at the lower end of the spectrum. In many cases, in rural polytechnics
or technical institutes, the teachers themselves have had only basic education.

Revision of Existing Curricula and Introduction of New Courses

In some states, the course curriculum has not been updated for 20 or more years, so even if students have
completed VET qualifications, they may not be employable in modern industry. Due to the transition of the

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Indian economy from being agriculture-based to knowledge-based, it is all the more imperative to have
new and revised courses which fulfil the requirement of modern industries. Of the trained candidates, the
labour market outcomes as seen from placement/ absorption rates are reportedly very low. An ILO study
done in 2003 reports that in the states of Orissa, Andhra Pradesh and Maharashtra, the percentages of
graduates found to be in wage employment/self-employment upon graduation from ITIs were 16.2 per
cent, 41 per cent and 35 per cent respectively. The corresponding percentages for those graduating from
ITCs were 21.3 per cent, 22.8 per cent and 35.6 per cent respectively.

Inflexible Approach
The current framework requires minimum qualifications, varying from Class VII-XII, for participation in
formal vocational training. While this may be necessary for certain trades, it is unnecessarily restrictive in
others. Additionally, once an individual leaves mainstream education for vocational training, there is no
provision for him/her to return to the former at a later stage. This not only encourages a general view of
work and study being mutually exclusive options, it also increases the perceived risk of taking up vocational
training. Moreover, there is not enough emphasis on short training courses designed to impart specific
skills. Vocational education and training in India rely exclusively on a few training courses of long duration
(2-3 years) covering around 100 skills. In China, on the other hand, there exist about 4,000 short-duration
modular courses which provide skills more closely tailored to employment requirements.

Association with Industries

While there exists a provision for the participation of industry representatives/experts in the setting of
curriculum and hiring of apprentices, there is still a significant mismatch between industry skill requirements
and the talent pool emerging from ITIs/ITCs. This has contributed to low success in the labour market for VET
graduates. The private sector largely undertakes in-house training programmes but training to outsiders is
very limited, restricted to catering to their own felt needs in the nature of captive skill development. This is
largely because of the fear of losing trained skilled workers to competition which has resulted in constant
shortages in private investment in this area.

The Road Ahead: Key Policy

Initiatives
Encouraging Public–Private Partnership
The central government too has realised the importance of industries in the creation of a suitably trained
workforce for the country’s labour requirement. The DGET (Directorate General of Employment and Training,
Ministry of Labour) initiated a pilot programme ‘Formation of Institute Managing Committee (IMC) for ITIs’
in 1998 in collaboration with the Confederation of Indian Industry (CII) to improve cooperation between
Industry and ITIs. Under this concept, Industry is associated as partners rather than advisors. An IMC is
formed at the ITI level, which manages some of the activities of ITIs. An IMC comprises members from
State Government, Industry, ITI and others. The chairperson of the committee is a representative of the
local industry. This committee works under the supervision and control of the Steering Committee, formed
at the state level. The concerned State Secretary in charge of the vocational training at state level is the
chairperson of the Steering Committee. The IMCs have already been formed in 515 ITIs in 28 states. Major
benefits from IMCs are active participation of industry, organising campus interviews, arranging on-the-job
training and industrial visits, training and development of faculty, vocational guidance and counselling,
better upkeep of equipment, resource generation and utilisation by the ITI itself.

Upgradation of 500 ITIs into Centres of Excellence (CoE)

A scheme for upgradation of 500 ITIs into CoE to produce world-class technicians has been launched by
DGET. Already, 100 ITIs have been chosen for upgradation from domestic funding while another 400 are
proposed to be taken up under a project with the World Bank’s assistance for which negotiations are taking

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place. Multi-skill modular courses with active participation of industry are being introduced for different
industrial sectors. The industry would also be involved for testing and joint certification.

Skill Development Initiative

To fulfil the budget announcement of 2005–06, a scheme-‘Skill Development Initiatives’-to train 1 million
persons in 5 years and thereafter 1 million every year is being taken up with a Public-Private Partnership
model. It is envisaged to utilise available infrastructure with spare capacity to impart skill training to these
persons.

National Mission for Skills

The Prime Minister announced the setting-up of the National Mission on Skill Training in his speech on
Independence Day, 2006. The Ministry of Labour and Employment accordingly has undertaken the task of
setting up a ‘National Mission for Skills’ under its control for a period of 5 years initially so as to ensure that
envisaged targets are met and the workforce is equipped with the necessary skills to be competitive in the
world economy.

Authors
Luv Jasuja, Principal Consultant | luv.jasuja@technopak.com
Prashant Kashyap, Senior Consultant I prashant.kashyap@technopak.com

82 | Vocational Education in India: Key Challenges & New Directions