Sriram Gutta

“If you teach a man to fish…”: The NSDC’s efforts to provide job training to 150 million Indians – part 2

Editor’s note: This is the second post in a three-part series. The first two parts are an interview with Dipra Mukhopadhyay, and the third part will be an interview with one of NSDC’s early investees.

The National Skill Development Corporation (NSDC) is a unique public-private partnership (PPP) in India. Set up in 2009, its mission is to skill 150 million Indians by 2022. It aims to achieve this by catalyzing the creation of large, high-quality for-profit vocational training institutions through joint ventures with the private sector. The NSDC has made funding commitments of approximately US$400 million towards 100 projects through the end of the 2012-13 fiscal year.

Dipra Mukhopadhyay is a member of the NSDC’s core investment team, overseeing the allocation of $250 Million in new investments and the expansion of NSDC’s portfolio. In part one of this interview, he discussed the challenges and potential of the project. In part two, he talks about NSDC’s selection process, its focus areas and its efforts to maximize the effectiveness of vocational training in India’s poorest communities.

Sriram Gutta (SG): Let’s talk about the problem of opportunity cost. Since a large portion of the poor in India are dependent on daily wages, how would you mobilize them to pay for skilling while they also lose their daily income?

Dipra Mukhopadhyay (DM): It is well-documented that almost 93 percent of India’s workforce is employed in the informal sector and is dependent on daily wages. This is probably most evident in India’s construction sector. Here, the industry must co-invest in the training to ensure that there is no loss in daily wages. Training should happen at the work sites, and the industry should allow workers to take off two to three hours from the daily work to get trained, without having to forgo any of their daily wages. Training should demonstrate tangible evidence of wage augmentation for the workers to induce them to pay at least a fraction of the cost.

SG: Other countries, including several European nations, have more evolved skill development initiatives. Has NSDC learned from any of these models, and has it formed any partnerships?

DM: We are working with several international organizations in the skills and employability space, including the BIBB of Germany, the U.K. Commission for Employment and Skills, and Skills Australia. In fact, the concept of the Sector Skill Councils has been adopted from studying the best practices in several developed countries, especially the U.K. [Editor’s note: the Sector Skill Councils are independent, employer-led organizations that work in partnership with the government to increase employer investment in skills training.] The NSDC is working with diverse stakeholders including the European Union to introduce a comprehensive Skills Qualification Framework in India. To that extent, four Sector Skill Councils supported by the NSDC are involved with implementing a pilot to introduce vocational education in schools in Haryana.

SG: To skill such a large number, NSDC would need to work with thousands of organizations. How do you maintain the quality of your portfolio and ensure that proposals aren’t accepted just to reach targets?

DM: The NSDC supports business ventures that aim to skill at least 50,000 people in 10 years. This is to ensure that we promote enterprises that exhibit the potential to scale and attain sustainability in their operations. We have a robust and independent due diligence process wherein a proposal is scrutinized at three levels before it is presented to our board for final approval. Apart from an internal due diligence team, we have empanelled leading consulting and audit firms such as Deloitte, Grant Thornton and E&Y to scrutinize every proposal independently to ensure transparency and the quality of our portfolio companies. However, it is also important to understand that in spite of having all the checks and balances in place, there will be failures, since we are implementing a unique model of social engineering that has never been tried before. As a market maker in the sector, the NSDC will need to continuously support new models and take more risks than other conventional venture capitalists or private equity firms.

SG: NSDC focuses on 21 sectors – do you also have a geographic focus? Are there any special initiatives for the seven least developed states in India?

DM: The NSDC has been set up to support sustainable ventures in skill development that create employment or self-employment opportunities for trainees, and address an industry’s needs for skilled manpower across industries. We will support business enterprises that adhere to this logic even if they fall outside the ambit of the 21 sectors. To give you a specific example, the NSDC is supporting Madura Microfinance that is working to train more than 3 million micro business owners across rural India in business management and entrepreneurship skills. We are also looking to support proposals for skill development in the sports sector, which will also fall outside the ambit of the 21 sectors.

Our partners are operating centers in some of the poorest and the most inaccessible geographies, such as the North East and the Sundarbans. Gram Tarang, a NSDC partner, is skilling people in the Naxallite-affected districts of Orisa and Andhra Pradesh. In 2012, Medha Learning Foundation became the first NSDC partner to operate out of the state of Uttar Pradesh. We are also working with the Ministry of Home Affairs to implement a special initiative for the conflict-hit state of Jammu and Kashmir. The project titled “Udaan” will provide higher employment opportunities that are currently not available within the state for 60,000 graduates and post-graduates in the next five years.

SG: While you have an objective goal of skilling 150 million Indians, how do you ensure that these people get jobs and lead a better life? Is there a way that NSDC tracks the impact of its partners?

DM: Every entity supported by the NSDC has to build in a provision of a minimum guaranteed placement of 70 percent in their business plans. The NSDC funding is extended in tranches and is based on the achievement of milestones such as the number of people trained and placed at the end of every year. We have a sophisticated monitoring system to track the performance of all our partners on these critical parameters, which requires all partners to report their performance on a monthly basis. The monitoring process also involves regular site visits of our partner-run centers, contacting students about the quality of training and placements, and tracking the trainees post-placement with the entities they are working for.

SG: What has surprised the organization since launch, and what sort of steps have been taken to adjust to this unexpected realization?

DM: I think the sheer scale of the response of the private sector to the skill development mission has been phenomenal so far. Our portfolio consists of a vibrant mix of large multinationals and start-up entrepreneurs. As mentioned earlier, we are currently supporting more than 80 skill development enterprises, and will aim to add another 60 partners to our portfolio in this financial year. The NSDC is working overtime to bolster its internal processes and its engagement with multiple external stakeholders to manage this unprecedented scale. Our success is predicated on the success of every single partner of ours. The challenge of maintaining the quality of output amid such a rapid expansion of the ecosystem is huge, and requires continuous engagement at multiple levels.

public-private partnerships, skill development