Skills Training for MSMEs : Daily Current Affairs

Relevance: GS-3: Indian Economy, mobilisation of resources, growth, development and employment.

Key Phrases: MSMEs, ITIs, District Industries Centres, skilling, vocational skill development, cluster-based vocational training, Model ITI programme, German model, dual training systems, Tripura Bamboo Mission, Draft MSMEs 2022 policy,

Why in News?

  • There is little interaction between MSMEs and the ITIs. District Industries Centres should step in to boost skilling.


  • Developing and implementing a vocational skill development policy for Micro, Small and Medium Enterprises (MSMEs) is a challenging exercise, especially for emerging countries.
  • Skill development policy for MSMEs should be supply-driven.
  • MSMEs do not have the necessary fiscal/human capital or scale to train workers.
  • Supply-driven vocational skill development policies run into the issue of a mismatch between what the skilling/training agencies are supplying and what firms want. On the demand side, too, MSME workers typically need to be multi-skilled.


  • The MSME sector comprises micro, small and medium enterprises that are classified according to certain parameters.
  • Before 2018, MSMEs were categorised based on the amount invested. After a change in regulations, they are classified based on their annual turnover, whether they operate in the manufacturing or service sector. The new conditions are as follows.
    • Micro enterprise: When annual turnover is up to Rs. 5 crore
    • Small enterprise: When annual turnover is above Rs. 5 crore and less than Rs. 75 crore
    • Medium enterprise: When annual turnover is above Rs. 75 crore and less than Rs. 250 crore
  • MSMEs make a crucial contribution to India's GDP. MSMEs contribute
    • More than 29% to the GDP
    • 50% of the country's total exports. According to DGCIS the export value of MSME related products in India accounted for over 49.4% of total exports during 2020-21.
    • One-third of India's manufacturing output
    • It is the second largest employment generating sector after agriculture. It provides employment to around 120 million persons in India.
    • Indian MSMEs produce more than 6,000 different products for local and global consumers.
    • MSMEs act as a catalyst for socio-economic development of the country. Since more than half (324.88 lakh units) of the MSMEs operate from rural India they play a big role in intertwining the rural and urban economies and societies.

Challenges to skill development:

  • The supply-driven vocational skill development policies run into the issue of a mismatch between what the skilling/training agencies are supplying and what firms want.
  • On the demand side, too, MSME workers typically need to be multi-skilled.
  • Rural Urban Divide: There is a high level of rural urban divide which makes opportunities and outcomes unequal between rural and urban India.
  • Missing industrial linkages: Industries present relevant courses and their requirement is usually missing in the training programme.
  • Huge financial investment: To keep pace with structural changes, India needs to invest in technological up-gradation for skilling youth as per market demand.
  • Overburdened responsibility: As per OECD data, the proportion of the working-age population (15-59 years) is expected to be over 64 percent of the population by 2021. It will be a massive burden on limited administrative capability.

Do you know?

  • The National Council of Applied Economic Research (NCAER) was founded in 1956 as an independent, board-run body to give support to both the government and the private sector in empirical economic research.
  • NCAER is India’s oldest and largest independent, non-profit, economic policy research institute.
  • The Infrastructure Leasing & Financial Services (IL&FS) is India’s largest infrastructure growth and finance business. Its mission is to take part in the nation’s growth and prosperity through the development of pioneering high-standard technology and the provision of innovative financial products to India’s customers.
  • In 1987, it was established & supported by CBI (Central Bank of India), HDFC (Housing Development Finance Corporation Limited) and UTI (Unit Trust of India).

Solution to Skill development:

  • One solution to overcome demand and supply mismatch is to provide cluster-based vocational training. The home-grown initiative involves public-private partnerships (PPPs).
  • The Infrastructure Leasing & Financial Services (IL&FS) had started a cluster-development initiative, working in PPP (Public Private Partnership) mode with governments on MSME manufacturing clusters.
  • Model ITI programme:
    • The objective of the Model ITI programme was to upgrade some of the government ITIs into model ones.
    • The key idea was to improve industry-ITI interaction. The ITIs would be located in industrial clusters.
    • An industry partner chairs the Institute Management Committee, providing inputs in course curriculum, upgrading of skills of teachers and providing internships, apprenticeships and employment, etc.
  • German model:
    • Germany has one of the better vocational skilling models in the world.
    • There are several German institutions working on both the supply and demand sides of skilling — training workers and upgrading business member organisations so that they can come together on the skilling aspect, along with other aspects.
  • Elements of dual training systems had been introduced
    • The Ministry of Skill Development and Entrepreneurship in partnership with German International Cooperation in automobile, electronics, and construction clusters in India.
    • The course enables trainees to focus on practical skills and applications, get shop floor experience in their respective training companies and join the working world immediately after graduation with great prospects for their future.
  • District Industries Centres: The District Industries Centres (DICs) may map the clusters in their regions and understand their skilling needs. It is recommended that the DICs work with the industrial clusters, local vocational training partners, especially ITIs and State-level departments. The idea is to increase interactions between all stakeholders and address skilling gaps

Case study

  • The Tripura Bamboo Mission (TBM) is working to develop a value chain in the bamboo industry in the State, starting from bamboo plantations (farmers) to producing bamboo handicrafts (self-help, producer groups, etc.) to actually help connect with the markets through both digital and off-line means. TBM provides the skilling and training needs throughout the value chain.
  • When NCAER interviewed private enterprises in the bamboo industry, located in Agartala but outside the TBM, found that the interaction between MSMEs and local Industrial Training Institutes (ITIs) was rather limited in area outside TBM as compared to area under TBM.


Focus on Skilling in present Budget-22:

  • The Draft MSMEs 2022 policy emphasises skill development at the district level and recommends assessment of the demand and supply of vocational skills. This should be done at the level of industrial clusters as well.
  • Digital Ecosystem for Skilling and Livelihood – the DESH-Stack e-portal: the government is launching an e-portal to skill, reskill and upskill citizens through online training. There will be API-based trusted skill credentials, payment and added discovery layers to find relevant jobs and entrepreneurial opportunities.
  • Realignment of the National Skill Qualification Framework (NSQF): It will be aligned with dynamic industry needs so that employability will be boosted with the help of skilling programmes and partnerships with the industry.
  • Skilling programmes and partnership with the industry will be reoriented to promote continuous skilling avenues, sustainability, and employability.
  • Starting focused relevant courses: In select industrial training institutes (ITIs), in all states, the required courses for skilling will be started.


Other initiatives by government to boost skilling:

  • Pradhan Mantri Kaushal Vikas Yojana (PMKVY): To enable a large number of Indian youth to take up industry-relevant skill training that will help them in securing a better livelihood.
  • Deen Dayal Grameen Kaushalya Vikas Yojana (DDU-GKY): To transform rural youth aged between 15 to 35 years into an economically independent and globally relevant workforce.
  • Pradhan Mantri Kaushal Kendra: State-of-the-art Model Training Centres envisaged to create benchmark institutions.
  • Skill India Mission: To provide adequate training in market-relevant skills to over 40 crore youth by 2022.
  • Skills Strengthening for Industrial Value Enhancement (STRIVE) scheme - To improve the relevance and efficiency of skills training provided through Industrial Training Institutes (ITIs) and apprenticeships.

Way forward:

  • MSME is the backbone of the Indian economy. This sector has proven the instrumental in the growth of the nation, leverage exports, creating huge employment opportunities for the unskilled, fresh graduates, and the underemployed.
  • The matching between industry needs and skilling providers has to improve if we want to address employability and employment issues in the backdrop of the Covid-19 pandemic.

Source: The Hindu BL

Mains Question:

Q. Discuss the role of MSME sector in Indian Economy and the challenges being faced by it and suggest measure to overcome the same.