Jan 30, 2023

Budget 2023: Not just fiscal deficit, managing “skills deficit” in our workforce should also be a priority

There are contrasting views and forecasts from various experts on how the year 2023 could be for the Indian economy. While some advocate exercising extreme caution on governmental spending due to the looming threat of a global recession, others are more upbeat, primarily on the basis of a few recent trends that show India is faring relatively better than many other world economies. However, most experts expect that managing the fiscal deficit during this budget will likely remain one of the key focus areas of the government and that it would need to ensure a fine balance between fulfilling both long-term and short-term national priorities.

Unsurprisingly, there seems to be considerable talk about the fiscal deficit. However, I wish to bring to attention how addressing another kind of deficit, the massive “skills deficit,” which is faced by the workforce of our country, is also extremely critical for future growth. There is enough that is written already in several reports by leading experts from credible agencies about the looming risk of many job roles becoming redundant in the next few years. There are also well-researched forecasts about many new evolving job roles that would be relevant for new-age workplaces. The advent of intelligent technologies is mainly causing job role redundancy problems as well as the generation of new job opportunities.

It is evident that these new technologies, besides being a source of threats, are a source of certain other opportunities as well for the existing workforce. And in the absence of massive upskilling efforts and investments by employers, the government, and even the workforce themselves, neither most of these opportunities can be addressed, nor all the threats can be mitigated successfully. To give an additional perspective on the significance of addressing the “skills deficit” challenge, it is estimated that in the next five years, approximately 40% of Indian employees may need reskilling and nearly 60% of them may need to upskill to be market- and industry-ready.

The critical “skills deficit” challenges related to our nation’s existing workforce will likely pose both an immediate as well as a long-term challenge to addressing the growth and prosperity objectives that we have for our nation. Accordingly, in my opinion, with this year’s budget, our government could empower us all, even more, to collectively address the skills deficit challenge in India’s existing workforce, by considering the below suggestions and/or recommendations:

GST exemption for reskilling and upskilling programmes beyond the categories of programmes presently exempted: This suggestion is for our government to look at the prospect of considering “reskilling and upskilling” as an essential product or service that is vital for the survival and progress of India’s workforce. While most of our workforce now realize an urgent need to reskill or upskill, the affordability of high-quality reskilling or upskilling programmes is still a significant barrier for most individuals and even their employers.

Presently, only a few categories of skilling programmes affiliated with some agencies and organisations are exempt from GST. The challenge of skilling is massive, and the government should consider increasing the ambit of skilling programmes, which can be exempted from GST. For example, currently, even certificate programmes in domains with a steep talent shortage and those offered by prestigious universities, institutions, and providers do not qualify for GST exemption. Accordingly, when the ambit of GST-exempt reskilling and upskilling programmes is expanded, this will help in making them more accessible and affordable for individuals and employers on a timely basis.

Income tax benefits for working professionals who invest in their own skill development in high-demand domains: Some of the leading sectors and industries, where skill gaps need to be bridged, include affordable and clean energy, BFSI, IT, retail, healthcare, and production and manufacturing. And some key areas where technology professionals need to be reskilled the most, include Data Science, Cloud Computing, AI/ML, Cyber Security and Blockchain. Just the way our government provides income tax benefits to employees on home loans and some other specified investments, they could also consider offering similar schemes to encourage employees who invest in upgrading their skills in areas of high industry demand.

Content is King; however, content developed to aid skill development may not be subject to king-sized tax brackets: The learning content, especially the digital content, is the core of any scalable upskilling and reskilling endeavour. Most leading institutions and universities (if not all of them) do realize that the development of high-quality learning content, performing updates, maintaining, and deploying at scale often require a variety of expensive content-related services from a network of specialised vendors and suppliers. Indirect tax relief on these essential input costs for skilling and education programmes would go a long way in building more affordable and accessible reskilling-upskilling programmes by universities and other educational institutions.

Consider investing in building an up-skilling Metaverse: In various advanced technology domains, the availability and accessibility of learning infrastructure and resources at an affordable price is a big impediment in upskilling the workforce. Our government’s announcements from last year around investments in e-labs have been well received, as they will continue to improve access to high-quality learning resources. However, if the government could considerably increase investments in new-age technologies that enable real-life-like digital environments to teach advanced tech skills to India’s workforce, these will also act as key reinforcements for its previous endeavours and investments. With the advent of 5G and the increased proliferation of technologies, such as Augmented Reality and Virtual Reality, our government could consider making the required investments in this budget itself in an endeavour to start building a digital upskilling Metaverse for India’s workforce.

Support Upskilling of Gig Economy workers and expand the talent pool for priority industry sectors: As per a 2020-21 Niti Aayog report, India has about 7.1 million gig workers and this number is expected to grow to 23.5 million by the year 2029-30. As per CIIE.CO, a significant number of gig workers surveyed by them had completed high school education and many even had graduate degrees; however, most report that the work environment and financial constraints limit their ability to upskill themselves, which could help them take up even better jobs. As per a report by BetterPlace, a platform for frontline workforce management, it is the lack of digital and industry-specific skills that has constrained these Gig workers from growing their incomes and moving to better opportunities. Thoughtful and targeted government investments and industry incentives towards enabling the upskilling of this growing workforce could potentially help fill the talent gaps in many high-priority sectors.

India is certainly on a steady path to greatness, and a sharp focus on upskilling and reskilling, especially to address the “skills deficit” challenge, will go a long way in speeding up our country’s progress even further.