For India to realise its demographic dividend it is imperative that a significant proportion of the country’s workforce, currently employed in the informal sector, upgrades its skill-sets and shifts to more productive and secure occupations. The relative supply of workers with vocational skills has been on the decline since the early 1990s. Although India has improved its vocational education capacity in the new millennium, other developing countries have posted larger gains during the past decade.

Unfortunately existing government-promoted institutions providing vocational education and training (VET) suffer from bureaucratic inertia and have little incentive to improve learning outcomes while industry involvement is nascent, resulting in a huge gap between industry demand and number of skilled personnel available. Therefore there’s pressing need to find alternative means of developing a pool of skilled workers and improving productivity in the manufacturing and service industries in particular.

The National Skill Development Policy, 2009 high-lights the need to fund indivi-duals rather than institutions to provide choice in availing skills development education. The policy does not discri-minate between private or public delivery of VET, rightly focusing on outcomes, stud-ents’ choice and competition among training providers. To increase learners’ choice and create opportunities for private sector enterprises to provide VET, one of the reforms suggested is the use of skill vouchers, an idea which has also found favour with the Planning Commission.

A skill voucher is an instrument given to an individual or an enterprise which enables the recipient to sign up for VET from any education institute accredited with the provider of the voucher. Payment for tuition is made with the vouchers with top-up contributions made by the student/learner. Once training is completed, the accredited institution redeems the voucher.

Various countries have implemented the skill vouchers scheme successfully. One of the better examples is of Kenya which under its Jua Kali Voucher programme grants vouchers to business enterprises. The programme is targeted at micro and small enterprises (MSEs), and its prime objective is to increase the supply of a broad range of training and business development services. A study of the pilot phase of the programme found that while the MSEs which didn’t issue skill vouchers experienced a sales decrease of 2 percent, MSEs which participated in the voucher progra-mme witnessed 100 percent increase in output and sales revenue. Participating MSEs performed better on almost all variables including sales, owned assets, business generation and employment creation.

A similar scheme was implem-ented in Paraguay by the Inter-American Development Bank which issued vouchers offering subsidised training to individuals. A preliminary evaluation indicated that the programme helped to quickly create a private sector training industry offering VET appropriate for MSEs. Another outcome of the programme was that it altered the balance of power in the training market in favour of micro-entrepreneurs. This new dynamic introduced competition between VET institutions to attract clients, forcing them to innovate and provide VET required by industry and business.

The time has come for India to also adopt the skill vouchers programme as an alternative to the current framework of supply-side, public sector inter-ventions. However as with all policy interventions, there’s often a devil in the details. Thus while designing the skill vouchers programme it’s important to define the target group with precision for maximum impact. It’s important also to minimise the possibility of deadweight loss, i.e ensure that individuals and enterprises in a position to pay for VET don’t benefit from the programme. Moreover vouchers should be designed as secure instruments to reduce the possibility of fraud. To give the beneficiaries a feeling of ownership of vouchers it’s also advisable to require trainees to pay a small amount of top-up money for VET.

In the process of devising a skill vouchers programme, training providers must not be limited to institutions and individuals who provide technical/industrial training, but should also include craftsmen who can impart traditional indigenous knowledge of arts and crafts training. The current list of modular employable skills approved by the National Council of Vocational Training does not include any traditional arts and crafts courses. Moreover for successful implementation of a skill vouchers programme, it’s vital that it is monitored and evaluated by an independent organisation.

Skill vouchers programmes around the world have demonstrated the potential of demand-side interventions in stimulating the supply of VET services. Adoption of the skill vouchers programme tailored to local conditions in India could provide a much-needed boost to urgently required vocational education and training — a hitherto neglected area of darkness in Indian education.

An article by Dr. Parth Shah, Founder President, CCS and Leah Verghese, Senior Campaign Associate, CCS in Education World, January 2011. Complete article can be accessed here.