Large scale skill development and vocational education is the mega policy challenge of our times with 500 million Indian youth in need of skill interventions in the next 10 years. The last two budgets were instrumental in setting up and funding the National Skill Development Corporation, which within a very short span of time has done a yeoman's job of forging public-private partnerships and co-incubating for-profit business models with entrepreneurs to attack skill development and employability on a large scale.
It would be fantastic if Budget 2012 took this mission to the next level by incorporating additional ambitious ideas. The time is ripe for a national vocational education loan scheme that will make young job seekers eligible for small-ticket bank financing in the range of 10-50K so that anyone can access a quality skill development program of their choosing irrespective of financial means and start repaying the loan once they have secured a job.
We already have college education loans in place and we know 80% of our college graduates are unemployable at the end of it; so why not create a lean and laser-focused national vocational education loan scheme that creates real employability? For sure, industry would welcome such a move as it would unlock supply side constraints on skilled talent.
To that end, the government can use Budget 2012 to direct public sector banks to make vocational education loans a priority lending sector item. Instead of various ministries pouring big money down the drain year after year in the form of direct subsidies to mediocre training organisations and NGOs that are not accountable for employment outcomes, let the government park funds with banks to provide a default guarantee for only the 10-25% of the vocational education loans that may go bad. That way, the nation would get 4-5X the leverage in terms of skill development impact compared to what we have today.