Can Apprenticeship work in India?
Any discussion on apprenticeship in India invariably draws a comparison with Germany and such other developed economies. Apprenticeship has been credited for low unemployment rates and higher productivity of the industrial workforce in such developed countries. Even in developing countries like India, a study conducted by Dalberg for DFID (now FCDO) in March 2020 placed the benefit-cost ratio at 1.3 to 1.9 times for employers across various sectors. Thus, there is a consensus that apprenticeship, which is learning while working, is the best pathway for education to work transition.
Admittedly, compared to 4% of workforce in Germany and 1.7% in UK, India has just 0.1% of workforce engaged as apprentices. Much of the low rates are attributable to the vastly informal sector in India. Out of 466 million workers (PLFS 2017-18), around 375 million or 80.47% are estimated to be working in the informal sector. Further, the economy related to crafts and skill trades is almost overwhelmingly in the unorganized sector.
Even among the around 90 million formal work force in India, less than 20 million are engaged in enterprises with 30 or more employers. Larger the size of the enterprise, higher would be its propensity to offer positions to trainees and apprentices. In Germany, for example, a total of 21.7% of the 2.1 million companies had at least 10 employees. Around 20.3% of all companies offer trainee positions in Germany, and this share increases from ~12% among enterprises with 1-9 employees to 81.3% in enterprises with more than 500 employees. For India, the proportion of enterprises (or establishments within the meaning of the Apprentices Act, 1961) with more than 9 employees is just 1.4% of the 5.85 crore establishments. Micro sized enterprises face significant hindrance in making human capital investment including on apprenticeships.
Apart from the structure of the economy, people’s perceptions of apprenticeship do also matter. It ranges from apprenticeship seen as an integral part of youth’s education in Germany to a salaried job with training in UK to apprentices as inexpensive labour in many developing economies. Interestingly, the stipend paid to apprentice is 20-50% of wages of skilled worker in, Austria, Denmark, Germany, Switzerland, etc., which constitute as a significant economic arbitrage in favour of the apprentices in the labour market. In India, stipends to apprentices are on average 80% of the wages of semi-skilled labour (ILO estimates), which implies that particularly for MSMEs that constitute most of the economy, the economic return out of apprentices engaged is not so attractive. Finally, the higher transaction cost for managing apprentices in India, with ‘optional’ and ‘designated’ trades, processing of contracts and stipends, and the approval and monitoring processes, etc.
Despite all these challenges, the number of Apprentices in India has grown from 0.9 lakh in 2014-15 to more than 5 lakhs in 2021-22. It is after considering the peculiarities of the Indian economy as discussed above that we need to approach the goal of raising apprenticeship opportunities in India to 10 lakhs by end of 2022, and to 60 lakhs by 2026.
How to increase the efficiency gains by the establishments in management of apprenticeship is a more controllable variable in this direction. The government shares stipend cost with the establishments up to 25% or Rs. 1, 500 per apprentice under the National Apprenticeship Promotion Scheme (NAPS). Ministry of Skill Development and Entrepreneurship (MSDE) has removed physical claim submission and allowed online process through the apprenticeship portal to reduce procedural delays in stipend reimbursement to establishments. The stipend support is proposed to be delivered directly to the apprentices through DBT mode to plug leakages. To further reduce the transaction costs to the establishments, enterprises with pan-India operations would be able to, instead of multiple states, engage with a single state-level apprenticeship/skill entity. Data sharing between apprenticeship schemes is expected to further streamline the registration process for enterprises. In terms of rationalization of curriculum, redundant courses have been removed and duration of apprenticeship training is made more uniform (with options to meet varying requirements of establishments and sectors). Standardization of curriculum and streamlining of process between types of trades (designated and optional), besides allowing establishments to customize their courses in line with their needs, etc. are other measures taken that would make it easier for establishments to engage a greater number of apprentices.
While the ease of doing business would certainly help, what remains an issue is how aspirational value of apprenticeship is raised in the country. For this to happen, it is necessary to embed apprenticeship in the educational ecosystem besides building credible pathways from apprenticeship to higher education so that apprenticeship receives the respect that it deserves for hands-on learning and improving the employability of our youth. To actualize this intent, defined credits shall be assigned on completion of Apprenticeship and assessment as per the new National Credit Framework so that it becomes useful in pursuing further education. In addition, Apprenticeships and Internships are proposed to be embedded in the school curriculums at the post-secondary level. The higher education system is also gearing up to mainstream Apprenticeship embedded degree programs as per the guidelines of the UGC.
Finally, to make headway in any public policy, the stakeholders need to be energized. A massive awareness program across the country has been launched in the form of Apprenticeship promotion events across more than 250 districts as calendar events through the year. A centralized helpline is expected to address any queries from establishments or candidates.
While we work on all the above action points to make apprenticeship as a win-win situation for trainees and establishments so that it further grows deep roots in Indian economy, it is necessary that apprenticeship does not become an avenue for supply of cheap labour. All forms of work exposure cannot be clubbed under Apprenticeship. Apprenticeship is defined by a verified written contract between the employer and apprentice; payment of stipend as per norms; structured training of the apprentice including non-production time training; light yet tight monitoring; and its assessment. The value proposition of apprenticeship for employers must emerge from qualitative aspects of higher productivity, lower attrition, and lower hiring costs. For the trainees, it is work-based learning with reasonable stipends and greater likelihood of getting employment. The fruits of Apprenticeship growth must therefore accrue to all concerned stakeholders: the Apprentice, the establishment, and the overall economy for a long-term sustainable growth.
Authored by: Shri Atul Kumar Tiwari, Secretary, Ministry of Skill Development and Entrepreneurship