Why India can't find enough labourers to staff its $1 trillion economic overhaul
Vimla, 26, wipes the dust from her forehead with a faded blue sari and fills a round metal dish with broken stones that she carries, barefoot, across a building site as part of the construction of New Delhi’s Metro.
“My job doesn’t need any training,” said Vimla, who only uses one name. She would have to make about 800 trips to carry the load of India’s most common small dump truck. Pointing to her supervisor, a man in a hard hat, she says: “I do what he says. If I was educated, maybe I could do his job.”
Builders including Larsen & Toubro Ltd, India’s biggest engineering company, say that while India has millions of unskilled workers like Vimla, it doesn’t have enough trained masons, carpenters and machine operators to construct the roads, railways and ports it needs.
Prime Minister Manmohan Singh said last month that infrastructure is the biggest bottleneck to faster economic growth. His government plans to spend $1 trillion to boost the expansion rate to 10 percent, from 7.4 percent last fiscal year.
“Lack of skilled workers impacts on all three fronts: quality, delivery and costs,” said KV Rangaswami, president of construction at Mumbai-based Larsen. “Skills cannot be imparted overnight.”
He said the lack of a trained workforce will be a major setback to the economy if the shortage isn’t solved.
The world’s fastest-growing major economy after China will expand 9.7 percent in 2010 and 8.4 percent the following year, the International Monetary Fund said October 6. India is ranked at 91 of 139 nations for its quality of infrastructure, behind Ethiopia and Indonesia, according to the World Economic Forum’s Global Competitiveness Index.
“Shortage of a skilled labour force is one of the challenges that construction companies will have to deal with as India steps up infrastructure plans,” said Mahesh Patil, who oversees about $3bn as head of domestic equities at Birla Sun Life Asset Management Co in Mumbai.
“Our outlook is positive for construction companies as we expect execution of projects to improve.”
Birla Sun’s holdings include Larsen & Toubro and Lanco Infratech Ltd.
India’s construction industry is the nation’s biggest employer after agriculture. It had about 31.5 million workers, 83 percent of them unskilled, in 2005, according to a report last year by the New Delhi-based National Skill Development Corp. More than three out of four of those laborers are in transport network and port projects, with the rest in real estate, it said. Construction is expected to employ 83 million people by 2022, the report said.
The nation’s investment in roads, rail and ports and other projects may reach about $500bn in the five years ending March 2012, the Planning Commission said in March this year. Singh said the same month that that figure needs to expand to $1 trillion in the following five years.
Singh plans to raise half the $1 trillion spending from private financing. The government lifted the cap on foreign investment in bonds for the first time in 18 months on September 24, allowing overseas investors to buy $5bn more in debt maturing in more than five years sold by infrastructure companies. India auctioned permits on December 2 to allow foreign funds to make limited purchases of the bonds within 90 days.
“You can’t ever overstate the importance of infrastructure to the growth India will take on in the next five, 10, 15 years,” Inderjeet Bhatia, associate director at Macquarie Capital Securities India Pvt, said in Mumbai. “It’s a massive virtuous cycle that can play out.”
Larsen and Toubro shares have advanced 18 percent this year, compared with a 14 percent gain in the Bombay Stock Exchange Sensitive Index. Mumbai-based Hindustan Construction Co has lost 38 percent, partly because a unit was named in a government bribery investigation last month. Hyderabad-based Lanco Infratech is up 7.7 percent.
“The quantum of projects far exceeds the capacity of the market of the contractors to deliver them,” Russell Waugh, managing director of the Indian unit of Leighton Holdings Ltd, said in Mumbai.
“India has developed a very good repertoire of skilled engineers and technically orientated people, but there has been a shortfall over the years of developing a skilled labour force to actually build things.”
Sydney-based Leighton, Australia’s biggest construction company, is building India’s longest road tunnel.
To help tackle the shortage, construction companies set up their own training schools. Larsen runs one in Panvel, about 56 miles from Mumbai’s financial center. On a recent day, Manoj Pehre was learning to bend steel rods into rectangles so they can reinforce concrete beams and columns.
With so few skilled workers, Pehre, 23, said his family hopes the training will be a first step toward running his own contracting business.
“They have good hopes and ambitions for me,” said the 23- year-old, standing in the midday sun in dark blue overalls and a yellow hard hat. “That I’ll make something big out of this training.”
Around him, other men learned carpentry, bricklaying and welding. The three-month apprenticeship costs Larsen 21,000 rupees ($467) per trainee. Virendra Mohod, 26, who’s studying masonry, said the education will give them better pay, job security and the chance to travel.
He and Pehre are among the lucky ones. Most workers are like Vimla, who moved to Delhi from Jhansi, Uttar Pradesh, four years ago with her husband and her son Rinka. He clings to her waist as she carries trays of rocks on her head, near the $275-a-night Taj Palace hotel.
Even with company training schools, India doesn’t have enough formal institutions to train the number of people needed, said Leighton’s Waugh.
The Construction Industry Development Council, set up by the central government with industry backing in 1996 to improve quality in the building industry, said it has trained and certified more than 250,000 construction workers in the past 13 years.
Among India’s 1.23 billion population, the unemployment rate among the labour force was 9.4 percent in the financial year ended March.
The skills shortage mirrors a similar deficit China faced during rapid development, said Liu Kaiming, executive director of the Institute of Contemporary Observation, a Shenzhen-based non-government organisation dedicated to labor studies.
“The Chinese government has no systematic training system currently in place,” he said. As in India, companies have had to educate their own workers over the past two decades.
A report last month by the 115-year-old Confederation of Indian Industry in Delhi said “youth unemployability is a bigger crisis than unemployment -- 53 percent of employed youth suffer from some degree of skill deprivation.”
“As a nation, we are suffering,” said Vinayak Chatterjee, chairman of New Delhi-based Feedback Ventures, which provides professional and technical construction services and counts Larsen and the Infrastructure Development Finance Co as shareholders. “We have not developed the training institutes to provide the manpower to cater for the boom.”
Plugging the skills gap will also require a cultural change, said A. Janakumar, a mechanical engineer and regional training manager at the Larsen institute in Panvel.
Trades traditionally are passed down through families, with masons and carpenters learning from their fathers. Laborers don’t get enough respect for their work, he said, and previously these jobs were done by underprivileged sections of the community. Workers also want to stay in their area and not move locations with construction jobs, he said.
“Fathers want sons to be engineers now, not carpenters,” said Janakumar. “They want sons to earn more and get more respect.”
India needs to start a Construction Industry Skills Training Program. This is the only way it can utilize the power of its population by converting the population advantage to a skills power base. The Government has to take the initiative to encourage the private sector to set up in-house training facilities by giving preferential treatment or grants etc, and Indians as a whole must take up this responsibility as a challenge. Only by doing so, they can compete at par with the rest of the world powerhouses and shift the power balance faster. There is no doubt the the shift of power is taking place, but we can accelerate it rather than proceed at a snail pace by utilizing the population advantage.