There is an unpleasant twist in the India growth st­ory. The country’s supposed demographic advantage — a growing proportion of working people in its overall population — was to power India’s fast growth up to 2030 and beyond. It now tu­rns out that the economy is going through labour pa­ngs and unable to deliver gr­owth. The boon of an ab­undance of cheap labour is gone. A shortage coupled with the rising cost of skilled and even unskilled workers are turning out to be bane of the economy in recent mo­nths. Companies across manufacturing and services sectors, including IT/ITES, are unable to get the right people for the right jobs. Sourcing workforce isincreasingly becoming a painful pro­cess.

The National Rural Employment Guarantee Act, the world’s biggest job guarantee programme that provided 100 days of employment to one member each of 4.1 crore households in just nine months to December 2010, according to the Economic Survey, has substantially reduced the flow of labour supply to industries in cities. By assuring minimum wages, the Act has also raised the cost of unskilled and semi-skilled labour and raised the wage benchmarks all round.

Flagbearers of India’s average 8.6 per cent growth story in the past five years — real estate, construction and infrastructure as well as the most dynamic of all, the services sector — today suffer from an acute labour shortage.“If 1,000 labourers are required in a day, we get only around 500 to 600. Projects are getting delayed because of shortage of la­bour,” says Sunil Mantri, chairman, Mantri group, le­ading property developers.

At the other end of the skill spectrum, only a fourth of 1.2 million engineers and other skilled persons passing out every year are employable, says CEO of National Skill Development Corporation Dilip Chenoy. They would have to be retrained or skills upgraded to make them employable.

At the same time, the virtual stagnation in organised sector employment in recent years has raised a debate over India’s growth process being “jobless”. In the manufacturing sector, according to the Economic Survey, there has been an increase in capital empl­oyed per unit of labour and output per unit of labour. However, a sharper increase has been observed in the rate of labour absorption.

But there is little doubt that labour pain —the sh­ortage and cost of labour as well as the skill mismatch — has become a big drag on growth.

A Ficci survey a fortnight ago said over 90 per cent of participant companies are reeling under shortage of labour, leading to slippages in production. The survey took into consideration over 100 companies and 10 industry associations from se­ctors such as textiles, le­ather, gems and jewellery, plastic products and auto components.

The responses showed that 89 per cent of the companies had been unable to meet the potential demand for their products due to labour shortage, leading to revenue losses of more than 10 per cent.

Across the board, all industry sectors place the shortage of manpower at around 25-30 per cent. If the focus is more on getting the right people, then the gap simply widens further. “The basic issue, more than the availability of manpower, is the quality of labour that is available,” says R Sarabeswar, chairman and chief executive officer of the Chennai-based construction major, Consolidated Construction Consortium (CCCL).

“There are lots of people all around, but you have to be really lucky to get the right man for the right job. The problem is more at the lower level or at the shop floor level,” says Amit Ladsaria, director, Kolkata-based Turtle, a leading me­n’s wear brand that has established a chain of garments store under its brand.

In the automobile sector, several auto-component co­mpanies supplying to OEMs feel the heat, whenever the market expands and dem­ands for automobile inc­reases. The Chennai-ba­sed Rane group companies, wh­ich are focused into auto components and employ ar­ound 4,000 people witne­ssed an attrition rate of ar­ound 15 per cent last year and suffered from shortages in all shop floor skills.

“As a property developer, the biggest problem that we face is not in selling an ap­artment or a villa, but in delivering the completed units on time due to labour shortage,” says Suresh Krishn, managing director, Isha Ho­mes, which is a fast growing property developer in Chennai. Add to that the cost of construction labour. According to Lalit Kumar Jain, CMD, Kumar Urban Development, a property developer based out of Mumbai, and president, industry bo­dy Credai, the cost of labour has doubled over the past two years.

The scenario is no different in the hospitality and retail sectors. “Availability of skilled manpower for the Indian hospitality industry is acute. There is a dire ne­ed to have trained manpower because around 5,000-7,000 trained graduates pass out from the catering institutes, while the industry’s requirement is more than double,” says Rajiv Ka­ul, president, Hotel Leel­aventure.

As a consequence, this also exerts an upward pressure on wages. As the Ficci survey reveals, 94 per cent of the firms reported an increase in wages due to shortage of labour. Many of the participants mentioned that it led to a situation where they had to accept unavoidable delays in delivery schedules, cut down on orders and even reduce production capacity at times.

Official data suggest that the country at present faces a shortage of 13.6 million of skilled persons, which is expected to go up to 244 million by 2022 in 20 focus sectors such as textiles, cons­truction, retail, tour­ism, automobile, banking, health care and transport.

The government has a national skill development plan that seeks to train 500 million people by 2020 in various employable skills. But today there are only 17 institutes for training trainers of which 12 are exclusively for women.

They churn out merely 1,600 trainers. To achieve the target of 500 million skilled workers by 2020, the country would need to generate 1,00,000 trainers annually. This, according to government’s calculations, means that at least 10,000 such training institutes would have to be set up in the next few years.

An official of the labour ministry who did not want to be named said there was severe shortage of skilled manpower particularly in sectors like textiles, engineering and small and medium industries. There is also shortage of electricians, fitters and welders. Construction is one sector, which is not facing severe shortage of skilled manpower though they are not formally trained but have acquired skills on the job.

The official blamed the private sector of not coming forward to participate aggressively in skill development but lately there is a growing realisation and many private companies li­ke Bharati Airtel, TVS group and several others have st­arted training institutes for skill development to not only meet their requirement but also for other industries.

Chenoy said NIIT has taken upon itself to train 7 million persons in information technology and a few other areas, Future Group to train 7 million in retail and related sectors, Calence and TVS group together to train about three lakh engineers.

The National Skill Development Council, which would be lending Rs 15,000 crore to enable private sector train 201 million people by 2022, has worked out a detailed year-wise progr­amme for skill developme­nt. In the first year of 2010-11, it gen­erated 25 million skilled wo­rkers. This year, it would 32 million; Chenoy said adding it would go up incrementally to 50 million annually.

The government has also been upgrading Industrial Training Institutes (ITI) since 2008. Of the 1,836 ITIs run by government 500 are being upgraded with World Bank aid. The remaining are being upgraded under public private partnership.

Not long ago, the Bric report of Goldman Sachs, predicted that India’s youthful population would not only be the driving force for its economy to surpass all except China and the US, the country would be a source of manpower supply to the world.

That forecast appears as a distance dream, although Indians continue to find jo­bs abroad as nearly 4 lakh did in the last few years. For now the economy struggles with a labour market that by all reckoning is supply constrained.

“Procurement of skilled or semi-skilled manpower is extremely difficult. A supply chain company employs lot of people in warehouses, for loading and unloading, sorting and operating mac­hines. There is also sho­rtage for people who can dr­ive heavy vehicles,” says Anshuman Singh, managing director & c­hief executive officer, Fut­ure Supply Cha­in Solutio­ns, part of the Fu­ture Gr­oup.

“On the one hand, we have the problem of unemployment and on the other, we have the equally or even bigger problem of unemployability. What an irony if you have the people and still cannot employ them,” asks Sanjay Budhia, managing director of the Kolkata-based Patton Industries, which is a leader in the field of plastic tanks, containers and PVC pipes. Patton has a strength of 1,500-1,600. There is a continuous demand and shortage of manpower at the plant level – in product development, des­igning, processing, and me­chanical engineering. It is very difficult to fill these vacancies, says Budhia.

“In facility management, the bulk of the labour force, almost 75 per cent, required is the at the entry level, which in industry parlance is called ‘quarter skilled’. Only 25 per cent of the force is fully skilled. The problem becomes enormo­us because we are finding it difficult to get this bulk of the workforce, as most of the people do not want to get into entry level jobs,” says T Raghu Nandhana, MD, UDS, the country’s la­rgest integrated facility ma­nagement company.

In the case of the pharma sector, the industry is heavily labour oriented and large investment is required in case a company opts to automate. “There is a dea­rth of talent because of several factors like government regulations along with high cost. While training aspects have caught up the attention of many, it does not ensure that the attrition is triggered. Keeping the high qu­ality standards, audit req­uirements and export no­rms, educational instituti­ons should start customising courses now,” says SV Raman Rao-HR head, Aurobindo Pharma. India has no country model to follow. China is comparable in te­rms of population but as Ganesh of Rane group says “We cannot learn from Chi­na, because those measures will not work in a democracy”.However, R Sethura-man, senior vice-president-fina­nce and corporate affairs, Hyundai Motor India feels that “countries like Ch­ina have a pool of ready workforce due to their focus on vocational training. We can replicate the same”.

(With inputs from Zehra Naqvi, Ritwik Mukherjee, G Balachandar, Rupesh Jhanve, Sangeetha G, Jharna Mazumdar,

S Shyamala and Trushna Udgirkar)

govardand@mydigitalfc.com