SKILL DEVELOPMENT AND EMPLOYMENT

www.graam.org.in December 2017 Karnataka Vision Document 2025 SKILL DEVELOPMENT AND EMPLOYMENT KAUSHALYA KARNATAKA KUSHALA KARNATAKA (Skilled Karnataka Prosperous Karnataka) Author: Basavaraju Rajashekharamurthy Executive Director GRAAM basavaraju@graam.org.in Grassroots Research And Advocacy Movement CA-2, KIADB Industrial Housing Area, Hebbal, Ring Road, Mysore 570016 Mobile:+91-9686666306 Landline:+91-821-2415412 Email: graam@graam.org.in 1

Table of Contents 1. Executive summary...6 1.1 Karnataka State of Opportunities... 7 1.2 Confronting Issues and challenges... 7 1.3 Opportunities for Skilled Human Resource in Karnataka... 8 1.4 Vision Statement... 8 1.5 Kaushalyabhivruddhi Panchasuthragalu - Five Formulas for Skill Development... 8 1.6 GOAL... 8 1.7 Key Milestones and Result Indicators for 2025... 9 1.8 Sector Focus... 9 1.9 Signature Initiatives... 10 2. Overview of the Skill and Employment Sector... 11 2.1 Sector Overview... 11 2.2 Skill development in India... 11 2.3 Skill Development and Employment - Profile of Karnataka... 13 2.4 Industrial and Economic Growth... 14 2.5 Status of Employment in Karnataka... 15 2.6 Sector Benchmark with other states in the country with good practices to emulate... 18 2.7 Global Benchmarks in the sector... 19 3 Strategic Analysis of the Sector in Karnataka... 22 3.1 Analysis of growth drivers... 22 3.2 Analysis of demand and supply of skilled labour force... 23 3.3 Assessment of strengths and opportunities... 24 3.4. Assessment of issues and challenges... 25 3.5 Government of Karnataka schemes... 28 4. Skill Development Vision 2025 for Karnataka... 31 4.1 Vision Statement... 31 4.2 Panchasutra for Skill Development and Employment... 31 4.3 Estimated Reach... 32 4.4 Guiding Principles... 33 4.5 Sector Focus... 34 4.6 Emerging Sectors... 36 4.7 Automation Technologies: Challenge or Opportunity?... 37 4.8 Target segments (Primary Stakeholders):... 39 Page 2 of 69

4.9 Target Segments and Skill Provision:... 40 4.10 Key Milestones and Result Indicators for 2025... 41 4.11 Signature Initiatives... 41 4.12 Implementation Road Map - Key strategic interventions... 52 4.13 Role of stakeholder departments... 61 4.14 Institutional Mechanism... 63 4.15 Financing (Budget) for Vision Implementation... 64 5. METHODOLOGY... 65 Reference list... 67 List of Figures Chart 1: Demand Supply Gap in Karnataka, 2012-2022 (figures in Lakhs) Chart 2: Envisioned Reach List of Tables Table 1: Focus Sectors for incremental growth... 9 Table 2: Incremental Human Resource Requirement for India across sectors by 2022... 12 Table 3: Distribution of workforce across different sectors in Karnataka... 14 Table 4: Classification of workers according to working conditions... 15 Table 5: Comparative statement of LFPR for India and Karnataka... 16 Table 6: Comparison of unemployment rates between India and Karnataka... 16 Table 7: Employment rates among post graduates from General and SC Categories... 16 Table 8: Sectoral distribution of Workers (in %) of Karnataka and India - 2011-12... 17 Table 9: Comparative statement for the neighbouring states of Karnataka... 17 Table 10: Key Takeaways for Karnataka from the Vision Documents of 4 states... 18 Table 11: Insights for Karnataka from International experience of 5 countries... 19 Table 12: Incremental increase in employment for Karnataka between 2012 and 2022... 22 Table 13: SWOC analysis of the skill eco system of Karnataka... 24 Table 14: Focus Sectors for incremental growth... 34 Table 15: Jobs of the future: Employment growth and decline by occupation... 37 Table 16: Jobs and Occupations: Employment Outlook... 38 Table 17:Target Segments for skill provision... 40 Table 18: Key Performance Indicators and key activities to achieve the vision 2025... 44 Table 19: Roles and responsibilities of different stakeholders... 61 Table 20: Institutional Mechanism..63 Page 3 of 69

List of Abbreviations CSO CSR CTE DCE DDU GKY DET E Hubs EMC skill FDI GDP GP GSDP GSVA GTTC HDR ICT IGNOU IT ITES ITI KEONICS KPO KSQF KSRLPS KVTSDC LFPR MES MHRD MSDC MSDE NGO NRLM NSDA NSQF NSSO NULM OBC PMKVY PPP PVTG QP RPL Civil Society Organization Corporate Social Responsibility Centre of Trade Excellence Department of Collegiate Education Deen Dayal Upadhyay Gramin Kaushalya Yojana Department of Employment and Training Entrepreneurship Hubs Electrical, Mechanical and Computer Skills Foreign Direct Investment Gross Domestic Produce Grama Panchayat (Village Panchayat) Gross State Domestic Produce Gross State Value Added Government Tool Room and Training Centre Human Development Report Information Communication Technology Indira Gandhi National Open University Information Technology Information Technology Enabled Services Industrial Training Institute Karnataka State Electronics Development Corporation Limited Knowledge Process outsourcing Karnataka Skill Qualification Framework Karnataka State Rural Livelihood Promotion Society Karnataka Vocational Training and Skill Development Corporation Labour/Work Force Participation Modular Employment Scheme Ministry of Human Resource and Development Multi Skill Development Centre Ministry of Skill Development and Entrepreneurship Non-Government Organization National Rural Livelihood Mission National Skill Development Agency National Skill Qualification Framework National Sample Survey Organization National Urban Livelihood Mission Other Backward Class Pradhan Mantri Kaushal Vikas Yojana Public Private Partnership Primitive Vulnerable Tribal Group Qualification Pack Recognition of Prior Learning Page 4 of 69

RSETI RTO RUDSETI SC SDC SDC SDEL SDG SECC SEP SGSY SHG SSC ST STP SWOC ULB UNDP VET VTP Rural Self Employment Training Institute Registered Training Organization Rural Development and Self Employment Training Institute Scheduled Caste Skill Development Centre Skill Development Centres Skill Development, Entrepreneurship and Livelihood Sustainable Development Goals Socio-Economic Caste Census Self Employment Program Swarna Jayanti Gram Swarozgar Yojana Self Help Group Sector Skill Council Scheduled Tribe Skill Training Provider Strength Weakness Opportunities Challenges Urban Local Body United Nations Development Program Vocational Education and Training Vocational Training Provider Page 5 of 69

1. Executive summary Karnataka is one of the rapidly developing state in the country. It is the Knowledge hub of India with a wide network of academic and research institutions. Benguluru is rated as the 4th Best Technology Hub in the world. It is also the hub of manufacturing sector, IT and ITES, biotechnology providing direct and indirect employment to millions. The Gross State Domestic Product (GSDP) of the state is Rs 11,33,194 crores as per 2016-17 estimate with an anticipated growth rate of 10.3% at current prices. The share of Karnataka's GSDP in All India GDP is 7.5 percent during 2016-17. Per-capita income of the state is Rs 1,59,893 (at current prices) with an increase 9.2 percent over the last fiscal. Karnataka attracted Foreign Direct Investment (FDI) of Rs 4121 million US Dollars and stands at top five hot destination for FDI in India. Coupled with this, the rise of the secondary and tertiary sectors and the service sector which provide competitive advantage and attract global investment into the state. This substantiates that the state is rapidly progressing, and it is the land of abundant opportunities. With the significant portion of the state s population in the age group of 20 to 59 years and expected incremental demand for people to work (8.47 million skilled persons by 2022) 1 state has both the advantage and the need to undertake the skill development programs more aggressively. As said demography provides potential and is not destiny, hence, skilling the people is critical for the state to reap the benefit of demographic dividend. The Skill and Employment Vision Document provides a detailed account of the efforts done in the past, the lessons learnt from the earlier experience, prevalent opportunities for the state and potential challenges. This document not only provides a vision at a broader or an abstract level, but additionally, it takes a leap to provide key pathways, strategic initiatives that should be taken up to reap the benefit the demographic dividend. The suggestions made by the people of Karnataka at district level workshops and through the various engagement platforms created by the Government are suitably reflected in this document. People s suggestions, expert s recommendations and the expertise of sector specialists have been meticulously distilled and amalgamated to provide a visionary pathway for the state. With 55 percent of the population in the age group of 20 to 59 years, Karnataka has an excellent opportunity of achieving economic growth through favourable demographic dividend. This can be accomplished only by promoting skill development of the working population in general and youth in particular. Skill development is imperative than anything else for Karnataka at the moment while the state is aspiring to be a choice of destination for the skilled human capital 1 Economic Survey of Karnataka 2015 2016 Page 6 of 69

1.1 Karnataka State of Opportunities The rise of the secondary and tertiary sectors and the service sector provide a competitive advantage to the state. This developed infrastructure and strong industry presence attracted global investment into the state. Out of 6.11 crore population, 2.44 crore have registered as workers in the state. Agriculture and allied sectors account for nearly 56 percent of the total workers. Key sub-sectors of the non-agricultural sector are manufacturing and mining (11 percent), shops, establishments and trade (9 percent) and construction (7 percent). Services account for the remaining 17 percent. Threefourths of workers are estimated to be in the unorganised sector. Workers in the unorganised sector consist of agricultural labourers and those in the sub-sectors of non-manufacturing such as shops, establishments & trade, construction, real estate & business activities and hotels & restaurants. Most of the workers in the organised sector are found in manufacturing & mining and information technology & biotechnology. In addition to strong industry presence, the advantage of demographic dividend and incremental demand for 8.47 million persons by 2022, skill development becomes imperative for the state to provide meaningful employment to the young population. In this context vocational education imparted through network of all the stakeholders that includes Government, Industry, academia, civil society organization and the other private sector skill building initiatives assume significance for providing meaningful employment to the growing population of the state. 1.2 Confronting Issues and challenges Though vast infrastructure is available for the skill development in Karnataka, with several agencies playing a key role much needs to be achieved in terms of making it more popular and acceptable. Although state has an array of opportunities to augment skill development and employment, there are some limiting factors posing a challenge. The issues such as regional disparities in terms of resource allocation and resource availability, inadequate knowledge base and information asymmetry, changing complexity of the job market and chronic under investment in skill sector are the key bottlenecks. Apprenticeship has not made a satisfactory progress so far and non-inclusion of marginalized group is still a prevalent issue. Lack of mobility for vocational streams into formal education system resulting in preference for the regular degree (graduate) courses. Skill training courses which are currently being offered are not being in sync with the market demand. Lack of industry involvement while designing and modifying the course curriculum, lack of quality infrastructure, gaps in providing industry training and exposure to the faculty, no recognition for apprenticeship, lack of skill premium provision, and very limited industry institute interaction are other critical challenges that needs to be strategically addressed. Page 7 of 69

1.3 Opportunities for Skilled Human Resource in Karnataka The National Skill Development Corporation (NSDC) estimated that the incremental demand for the workforce in Karnataka during the period 2012 to 2022 is 84.76 lakhs, of them, 27 percent are minimally skilled, 43 percent are semi-skilled, 25 percent are skilled and 5 percent are highly skilled. NSDC estimates show that there is a mismatch between the demand and supply of skilled and highly skilled workers in Karnataka. There will be shortage of 7.12 lakh skilled and 3.88 lakh highly skilled people in the state by 2022 if appropriate efforts are not made. The recent reports released by McKinsey Global Institute also predicts the growing need for skilled human resource in India despite the speculated automation disruption. 1.4 Vision Statement Internationally acceptable skilling to enable decent 2 employment and sustainable livelihood opportunity for all the citizens to thereby reap optimum demographic dividend. 1.5 Kaushalyabhivruddhi Panchasuthragalu - Five Formulas for Skill Development The focus and thrust shall be provided to ensure the following five factors that would establish an efficient skill development ecosystem to realize the vision. Strengthening Formal Vocational Training System with an industry oriented, future ready and vibrant curriculum Universalized Career guidance and placement services Revitalizing School Education Curriculum to make students employable Strengthening Apprenticeship System Universal Financial Inclusion and Secured Productive Asset Creation for the Poor 1.6 GOAL The total number of targeted population for the skill and livelihood programs during the period of 2018 to 2025 is 89 lakhs 3 by 2025 Flow Fresh entrants to the labour force from 2017-2025 is 54 Lakhs. This excludes those who go for higher education. 2 Decent Employment: Full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value (as per SDG 8) 3 Source:Dept of Skill Development and Entrepreneurship, GoK Page 8 of 69

Stock - Already in the labour force not with formal vocational training 35 lakhs 1.7 Key Milestones and Result Indicators for 2025 o Position Karnataka as the preferred destination of choice for skilled human capital in India by 2025 o Skilling 89 lakh persons by 2025 o Emerge among the top 10 global hubs for highly skilled manpower by 2030 o Establishing Skill University in the State by 2020 o o o Dedicated institutional structure is established from state to the block level for strategizing, planning, implementing and monitoring skill development and employment (livelihood) initiatives in the state by 2018 Establishing a Special Focus Group Cell under the Skill Mission by 2018 to ensure affirmative action to provide skill and employment opportunity for marginalized community Policies to Prosper: Exclusive and Futuristic Policies as well as Strategic Plan on i. Skill Development and Employment ii. Entrepreneurship Development iii. Livelihood Development iv. Social business policy for addressing social challenges with a sustainable approach 1.8 Sector Focus The skill development courses will be designed/further improved to utilize the potential employment opportunity in the following sectors on priority. The sectors are listed in the order of priority as per the incremental employment opportunity in Karnataka as estimated in the Skill Gap Study conducted by NSDC. The top 10 focus sectors are expected to have incremental employment opportunity in higher numbers (six-digit numbers) and the additional 08 focus sectors are expected to have an incremental opportunity in thousands (five-digit numbers). 1. Agriculture and allied Table 1: Focus Sectors for incremental growth 3. Building, Construction industry and Real Estate 5. Transportation, Logistics, Warehousing and Packaging 7. Education and Skill Development 9. Organised Retail Top 10 Focus Sectors 2. IT & ITES 4. Tourism, Travel, Hospitality & Trade 6. Healthcare Services 8. BFSI Additional 08 Focus Sectors 10. Textile and Clothing / Garment Page 9 of 69

11. Construction Materials and Building Hardware 13. Auto and Auto component 15. Furniture and Furnishings 17. Mining 12. Media and Entertainment 14. Food Processing 16. Electronics and IT hardware 18. Chemicals & Pharmaceuticals 1.9 Signature Initiatives Strengthening Employment Exchange at 29 Locations in Karnataka Initiative towards Organized Labour Force KAUSHALY BANDI (SKILL ON WHEEL) Six International Skill Training and Innovation Centres (Instinct) with a total intake capacity of 12,000 students. GREEN SKILL INITIATIVE: Sustainable Agriculture, Green Building, Water Harvesting and Renewable Energy Sectors Recognition of Prior Learning (RPL) in Farmers Community BUILD GREEN: Alternative and sustainable construction technology to foster eco-friendly construction in the state. SAVE WATER: Water Harvesting, Water Conservation and Water Reuse techniques will be imparted on priority. GREEN ENERGY: Harvesting renewable energy, particularly solar energy. Establishing International Migration Centre: An overseas employment cell to facilitate citizen of Karnataka to venture in to global employment market Establishing Centre of Trade Excellence (CTE) Design Karnataka Skill Qualification Framework (KSQF) Language for Livelihood: Language Learning Centre will be set up at the Career Guidance Cell at the taluk level Initiating Livelihood Facilitation Centre at the block or cluster level Summer Vocational Programs at the hobli level to reach children of secondary schools An efficient Labour Market Information System Skill Summits to bridge the gap between industry and academia / skill providing agencies. Page 10 of 69

2. Overview of the Skill and Employment Sector Education, vocational training and lifelong learning are central pillars of employability, employment of workers and sustainable enterprise development - International Labour Organisation 2.1 Sector Overview Indian economy is primarily dependent on agriculture followed by secondary and tertiary sectors for achieving growth rate of above seven percent. Agriculture employs 49.7 percent of human resource while industry and service sector employ 21.5 percent and 28.7 percent respectively in their workforce 4. Another eight to nine percent from the current workforce are engaged in the organized (formal) sectors of the country, about 5 percent of this segment are equipped with marketable skills. Considerable number of workers are likely to shift from agriculture 5 to the secondary and tertiary sectors which requires realigning of the skillsets of the migrant workforce to meet the industry requirements. The population projections predict that 12 million people will be added to the workforce annually. The large chunk of young population is available in India. With an appropriate and futuristic skill development initiatives, India can seize the opportunity to become the global hub for providing skilled workforce to meet the future skilled manpower demands of the world 6 2.2 Skill development in India India is a fast-growing developing country with relatively modest potential for automation over the next 10 to 15 years. Various national and international analysis observed that most occupational categories are projected to grow in India and strong economic expansion is anticipated. However, India s labor force is expected to grow by 138 million 7 people by 2030, or about 30 percent. Employing these new entrants in formal sector jobs will require job creation on a much larger scale than in the past. Automation which has begun in the various sectors make this challenge more difficult; some fear jobless growth. But, there is a potential in India to create enough new jobs to offset automation and cater the to the new entrants as well. 4 www.statistia.com 2013 estimates 5 Planning Commission document on Employment and Skill Development http://planningcommission.nic.in/hackathon/skill%20development.pdf 6 Government of India, Report on Education, Skill Development and Labour Force III (Chandigarh: Government of India), 2016, preface. 7 India s labor market: A new emphasis on gainful employment, McKinsey Global Institute, June 2017 Page 11 of 69

Increase of the population in the working age group which provides a window of opportunity by reducing the ratio of dependents to total workers resulting in higher rates of savings, investment, and growth. If appropriately utilized, this change in the age structure will result in the demographic dividend and provide immense growth opportunities to the nation. The provision of employable skills to youth remains to be an important challenge to reap opportunities of the demographic dividend. Despite the policy focus on skill development from 11 th Five-Year plan onwards, India still faces the dual challenges of the paucity of a skilled workforce as well as non-employability of large sections of youth who are educated but lacking employable skills. The data provided by the National Sample Survey Organisation (NSSO) show that only 2.4 percent of the Indian workforce has undergone formal skill training and another 8.6 percent have received non-formal vocational training. This indicates that only a very small portion of youths with vocational training are entering into the labour force. Since India emerges as a young country in the world, in order to harness the potential employment opportunity not only within the country, but also in the global job market, it is imperative to establish an efficient ecosystem for skill development in the country. A skill gap study conducted by the National Skill Development Corporation (NSDC) during 2010-2014 indicates that there is an additional net incremental requirement of 109.73 million skilled manpower by 2022 in twenty-four key sectors. The Government of India has initiated steps to strengthen skill development by setting a target of skilling 500 million people by 2022. The Ministry of Skill Development and Entrepreneurship (MSDE) was established in November 2014 to aggressively pursue Skill India agenda to ensure that the existing skill training initiatives are scaled up across the country within a short span of time and the quality of the programs are not compromised in the process (National Policy on Skill Development 2015). Table 1 below provides a snapshot of the incremental human resource requirement for the country across 24 different sectors by 2022. Table 2: Incremental Human Resource Requirement for India across sectors by 2022 S. No Sector Employmen t in 2013 (million) Projected employment by 2022 (million) 1 Auto and Auto Components 10.98 14.88 3.9 2 Beauty and Wellness 4.21 14.27 10.06 3 Food Processing 6.98 11.38 4.4 4 Media and Entertainment 0.4 1.3 0.9 5 Handlooms and Handicrafts 11.65 17.79 6.14 6 Leather and Leather Goods 3.09 6.81 3.72 7 Domestic Help 6 10.88 4.88 8 Gems & Jewellery 4.64 8.23 3.59 9 Telecommunication 2.08 4.16 2.08 10 Tourism, Hospitality and Travel 6.96 13.44 6.48 Incremental requirement from 2013-2022 (million) Page 12 of 69

11 Furniture and Furnishing 4.11 11.29 7.18 12 Building, Construction and Real Estate 45.42 76.55 31.13 13 IT and ITES 2.96 5.12 2.16 14 Construction Material and Building Hardware 8.3 11 2.7 15 Textile and Clothing 15.23 21.54 6.31 16 Healthcare 3.59 7.39 3.8 17 Security 7 11.83 4.83 18 Agriculture 240.4 215.6 (24.8) 19 Education/ skill development 13.02 17.31 4.29 20 Transportation and Logistics 16.74 28.4 11.66 21 Electronic and IT Hardware 4.33 8.94 4.61 22 Pharma and Life Sciences 1.86 3.58 1.72 23 BFSI 2.55 4.25 1.7 24 Retail 38.6 55.95 17.35 Total 461.1 581.89 120.79 Removal of Duplication in Retail Sector (10.37) (21.43) (11.06) Total Requirement 450.73 560.46 109.73 (Source: Ministry of Skill Development and Entrepreneurship, 2015) 2.3 Skill Development and Employment - Profile of Karnataka 2.3.1 Distribution of Workforce It is the responsibility of any progressive state to provide a productive and appropriate employment for the increasing work force. It is a challenge for any government including that of Karnataka to provide an updated and industry oriented skill development programs in the competitive environment, amidst multiple global challenges and rapidly changing employment landscape. High economic growth is necessary condition for creating new work opportunities, but it is the pattern of economic growth which has an important implication for productive and quality employment for the large section of labour force. Karnataka has an opportunity of achieving faster economic growth through favourable demographic dividend, provided that appropriate skills are imparted to the working population in general and youth in particular. Skilled persons will then be able to find employment in the state as well as outside (including other countries) where there is a demand for them. Out of 6.11 crore population, 2.44 crore have registered as workers in the state 8. Agriculture and allied sectors account for nearly 56% of the total workers in the state, while the rest are in the non-agricultural sector. Key sub-sectors of the non- 8 Economic Survey of Karnataka Page 13 of 69

agricultural sector are manufacturing and mining (11 percent), shops, establishments and trade (9 percent) and construction (7 percent). Services account for the remaining 17 percent. The challenge is to shift employment structure towards more productive non-agricultural sectors so that better and sustained source of livelihood for the working population can be sustained. Three-fourths of the registered workers in Karnataka are estimated to be in the unorganised sector comprising of agricultural labourers and those in the sub-sectors of non-manufacturing such as shops, establishments & trade, construction, real estate & business activities and hotels & restaurants. Most of the workers in the organised sector are found in manufacturing & mining and information technology & biotechnology. Table 3: Distribution of workforce across different sectors in Karnataka S No Distribution of workforce across sectors % of population involved 1 Agriculture and allied sectors 56 2 Non-agriculture sector (Manufacturing, mining, shops and establishments and construction) 27 3 Services sector 17 (Source: Karnataka Economic Survey 2015-2016, Department of Labour & Employment) 2.4 Industrial and Economic Growth The growth of the economy is vital for creating jobs. The stagnant or slowly growing economy will create jobs at dismal rate. Country or a state with good economic growth, high productivity and conducive environment for innovation will contribute to create more jobs. Karnataka has an advantage of constantly growing economy and an encouraging environment for innovation and entrepreneurship. The state requires to take a more strategic responsibility of converging and channelling different growth drivers. Karnataka is a leading state in the establishment of knowledge based industries such as Information Technology, biotechnology and engineering, and in the exports of electronics and computer software. Advance estimates show that Karnataka's Gross State Domestic Product (GSDP) at constant (2011-12) prices is expected to grow at 6.9 percent and reach Rs.871995 crore in 2016-17. Per Capita State Income (i.e. per capita NSDP) of Karnataka at current prices is estimated at Rs.159893 during 2016-17 (Rs.146416 in 2015-16) with an increase of 9.2 percent. Nearly, two-thirds (64 percent) of GSDP came from the services sector, followed by 24 percent from the manufacturing and 12 percent from agriculture. However, as per 2011 census, 49 percent of the workers (26 percent cultivators and 23 percent agricultural labourers) who are in agriculture contributed only 12 percent to the GSDP, thus indicating the need to provide appropriate skills to enhance their income both in the primary and Page 14 of 69

secondary sectors. Movement of labour across sectors resulting in economic mobility happens only with enhanced and appropriate skill development. Karnataka is the pioneer of the IT Revolution in India and is home for over 3500 companies and contributing over Rs. 2.20 lakh crore of exports. The industry contributes to over 25 percent of the State's GSDP with the state s share in IT exports is about 38 percent of the country s exports. The IT Industry in the State has emerged as one of the largest job providing sector and provides direct employment to over a million and indirect employment to over 3 million persons. According to a recent UNDP Report, Bengaluru is the 4th Best Technology Hub in the world and etched a global brand in the IT space with almost all the Fortune 500 companies have one or the other of their operations outsourced in Bengaluru. According to the Global Start-up Ecosystem Ranking Report 2015, Bengaluru, is the only Indian city to be ranked within the best 20 Start-up ecosystems across the world 9. Karnataka has played a key role in India's emergence as a significant player in the global biotechnology industry. Out of the 800 plus biotech units in the country, 228 companies and about 65 biotech startups are in Karnataka. The biotech export revenues contribution of Karnataka is Rs.3613 crore (USD 530 million). Karnataka has a vibrant auto industry which is fourth largest in the country with investments of around US$ 713 million and annual revenues of US$ 604 million. The automotive industry of Karnataka grew at a CAGR of 15 percent during 2009 to 2014. 2.5 Status of Employment in Karnataka In Karnataka the highest numbers of persons are self-employed (43.2 percent), followed by casual labourers with 36.7 percent and wage earners with 17.9 percent while the proportion of contract workers is 2.3 percent. The State has more number of casual workers than the national average of 33.1 percent and wage earners of 16.2 percent. Among the total working force, self-employed and casual labourers account for more than 80.3 percent, at all India level. In Karnataka also, their share is 79.9 percent. This once again reiterates the importance of sustainable livelihood opportunities for this category of workers. The classification of the workers according to their working conditions is given in Table 3 below: Table 4: Classification of workers according to working conditions Categories of workers Rate of employment (%) Self employed 43.2 Casual laborers 36.7 Wage earners 17.9 Contract workers 2.3 9 Government of Karnataka. Economic Survey of Karnataka, 2016 2017, Department of Planning, Programme Monitoring and Statistics, 2017, page 5 Page 15 of 69

(Source: Economic Survey of Karnataka 2016 2017, Department of Planning, Programme Monitoring and Statistics, Government of Karnataka, March 2017, p 406) Labour/Workforce Participation in Karnataka In Karnataka, the Labour/Work force Participation (LFPR) for persons aged 15 years and above is 56.2 percent, whereas this is 52.4 percent for India. This rate is 79.3 percent for males in rural Karnataka, which is third highest among the comparable States. The comparative statement for the LFPR for the country and the state are given below in Table 4 Table 5: Comparative statement of LFPR for India and Karnataka Indicator India (%) Karnataka (%) Labor/Work Force Participation rate (for persons 15 52.4 56.2 years and above) LFPR for rural men 77.3 79.3 LFPR for rural women 26.7 34.1 LFPR for urban men 69.1 74.3 LFPR for urban women 16.2 26.5 Worker Population Ratio (WPR) 50.5 55.5 WPR for rural men 75.7 78.5 WPR for rural women 30.2 37.6 WPR for urban men 67.1 73.2 WPR for urban women 14.8 25.7 (Source: Economic Survey of Karnataka 2016 2017, Department of Planning, Programme Monitoring and Statistics, Government of Karnataka, March 2017, p 400) The unemployment rate for Karnataka is 1.4 percent for all persons i.e., urban and rural put together, far below that the national rate of 3.7 percent (Economic Survey of Karnataka, 2016-2017). Table 5 below provides comparative statement of India and Karnataka with respect to unemployment rates. Table 6: Comparison of unemployment rates between India and Karnataka State Rural Urban Urban and rural M F T M F T M F T All India 2.9 4.7 3.4 3.0 10.9 4.4 3.0 5.8 3 3.7 Karnataka 1.1 1.4 1.1 1.5 3.1 1.9 1.2 1.8 1.4 (Source: Economic Survey of Karnataka 2016 2017, Department of Planning, Programme Monitoring and Statistics, Government of Karnataka, March 2017, p 401) When we look at employment and education among different social groups in Karnataka, the overall rate of employment among Post-graduates is 64.6 percent. Only 4.9 percent is unemployed, and the remaining 30.5 percent are not in labour force, meaning they are not seeking employment. The same rates for SC workers are 87.7 percent, 6.4 percent and 6.0 percent respectively, the details are provided in Table 6 Table 7: Employment rates among post graduates from General and SC Categories Employment among Employed (%) Unemployed (%) Not in labour force post graduates (%) General category 64.4 4.9 30.5 Page 16 of 69

SC 87.7 6.4 6.0 (Source: Economic Survey of Karnataka 2016 2017, Department of Planning, Programme Monitoring and Statistics, Government of Karnataka, March 2017, p 403) Among all the social groups, the rate of employment is high among SC post-graduates (87.7 percent) followed by ST (69.1 percent) and OBC (62.2 percent). Among Others (63.4 percent), highest rate of employment is found among people with just below primary education. Sectoral Distribution of Workers and Labour Productivity The sectoral distribution of workers across industry shows that about 49 per cent of the workers in Karnataka and 53.8 per cent of workers at all India level are engaged in agriculture and allied sector for their livelihood during 2011-12 (Table 7). The corresponding share in the Karnataka and India was 61 per cent and 58.2 per cent respectively in 2004-05. This shows that the share of agricultural employment in Karnataka and all-india level has declined between 2005 and 2011-12 by 12 per cent and by 4.4 per cent in Karnataka and India respectively, which is a positive trend towards structural transformation. This means workers are moving from farm to non-farm sector employment, which needs to boost further by devising appropriate policies to ensure structural transformation in coming years Table 8: Sectoral distribution of Workers (in %) of Karnataka and India - 2011-12 Industry Karnataka India Rural Urban Total Rural Urban Total Agriculture & allied 70.2 7.8 49.0 64.1 6.7 53.8 Mining & Quarrying 0.3 0.3 0.3 0.5 0.7 0.5 Manufacturing 9.4 18.4 12.4 8.6 23.6 11.3 Construction 4.3 9.7 6.1 11.1 9.3 10.7 Electricity, gas & water supply 0.2 0.8 0.4 0.2 1.3 0.4 Transport, storage & comm. 3.3 13.8 6.9 3.0 9.9 4.2 Trade, Hotel & Restaurant 6.2 24.5 12.4 6.5 23.4 9.5 Finance, Business & Real Estate etc 1.0 8.3 3.5 0.8 6.5 1.8 Pub Admin, Health & Edu. 5.1 16.4 8.9 5.3 18.4 7.6 Total 100.0 100.0 100.0 100.0 100.0 100.0 Employment (in millions) 18.6 9.6 28.2 448 98 546 (Source: Employment from the results of 68th NSSO round data (UPSS) and First Revised Estimates GSDP & GDP for 2011-12 from DES Karnataka and CSO, New Delhi) Table 9: Comparative statement for the neighbouring states of Karnataka S No Indicator India Karnataka Andhra Maharashtra (%) (%) Pradesh (%) (%) 1 Unemployment rate 10 2.2 1.6 2.0 1.3 10 Source: Employment and Unemployment Schedule, 68th Round, 2011-12, NSSO Page 17 of 69

2 Literacy rate 72.1 75.4 67.35 82.3 3 Primary sector employment rate 46.1 56 55 (2015) 47.2 (2012) 4 Manufacturing sector employment 21.8 27 10 34.5 rate 5 Services sector employment rate 32 17 35 18.3 (Andhra Pradesh source: Budget analysis for 2016 2017, Maharashtra Economic Survey 2016 2017 (figures based on 2011 census), Karnataka Economic Survey 2016 2017) Karnataka has been experiencing structural change in the composition of State Domestic Product with the share of primary sector declining in favour of the tertiary sector over a long time. Only in the last one decade or less, the structural change in employment has started showing up with share of agriculture and allied declining by 11 percent in all workers and 15 per cent in principal worker category. Correspondingly the share of industry and tertiary sector has gone up. But unlike the rest of India, the shift of employment from agriculture in Karnataka has moved largely towards services and not industry. The shift of employment observed in last several years has increased the requirement of training of the workers in acquiring skill in non-agricultural occupations. It requires more effective skill training programme. Further, increasing share of service workers among employed necessitates further focussing of training of workers in service oriented occupations. 2.6 Sector Benchmark with other states in the country with good practices to emulate For identifying the best practices in skill development sector, the Vision Documents of four states i.e., Haryana, Tamil Nadu, Madhya Pradesh and Andhra Pradesh were reviewed. In this exercise, two kinds of inputs policy related guidelines and implementation mechanisms have emerged. The relevant points are listed in the below table. Table 10: Key Takeaways for Karnataka from the Vision Documents of 4 states Haryana 1. Work towards integration of vocational education into formal education system and smooth mobility Page 18 of 69

2. Skill development initiatives for the girl child to promote leadership and confidence building among girls 3. Measures to make skill development more socially acceptable Tamil Nadu 1. Achieve universal secondary education through increase in enrolment rates in colleges (including vocation education) to over 50 percent 2. Usher in revolution in skill development aimed at skilling 20 million persons 15 million new entrants and 5 million already in the workforce 3. Envisions state to be a. Back office capital of the world b. Health care capital of South Asia c. Audio and video production and post production hub for Hollywood d. Tourism 4. Setting up 10 Centres of Excellence Madhya Pradesh 1. Promote vocational education at secondary education level through curriculum revision 2. Children with special needs are provided skill development in DTP, typing, designing, music, weaving, sewing, script writing etc 3. Couple of state of the art training facilities to be established with international collaboration for advanced vocational training 4. Independent third-party assessment and certification system for skill development 5. Market oriented and industry driven courses such as robotics, mechatronics, and nano technology 6. Technical and professional education in Hindi 7. Private sector to help and facilitate placement process for the trainees 8. Training of soft skills, personality development to be integrated into technical programs 9. Traditional skill sets of artisans and craftsman shall be recognized by formal certification, after direct assessment for enhancing their employability Andhra Pradesh 1. Integrating vocational education into formal education system 2. Infrastructure strengthening by adding new facilities and setting up new centres 3. Trained faculty with updated courses 2.7 Global Benchmarks in the sector International experience has lot of insights to offer in terms of best practices which have the potential as way forward for Karnataka. The review of skill development policies of Germany, Australia, Brazil, Singapore and China provide the following insights as elaborated in table below: Table 11: Insights for Karnataka from International experience of 5 countries Germany 1. The Dual VET Model: Germany s dual system of vocational education and training (VET) is a very simple and cost-efficient model. The practical training (approx. 70 percent of training duration) takes place in companies. This training is based on a compulsory curriculum, which is adapted to the conditions of the training company and is monitored and controlled by the respective chambers, who also arrange for the interim and final examinations (comparable to Sectoral Skill Councils). This in-house training is guided and imparted by certified corporate trainers. The apprentices Page 19 of 69

undergoing training sign a vocational training contract with the company and are paid a training salary by them. The theoretical part of the training (approx. 20 percent of training duration) is taught in vocational schools, run by the State governments. 2. Ease of integration of the theoretical and practical knowledge through vocational training 3. Easy mobility from vocational education to formal education system 4. VET in Germany imparts practical training and thus ensures that the curriculum and training is abreast with changes in technology or other changes in the industry. 5. Companies engaged in VET are also constantly involved in the process of upgrading and modernisation of curricula. Industries play a crucial role in identifying future requirement of skills and update training regulations to meet that demand. 6. Active role of the sector specific chambers in conducting exams to ensure quality control 7. Cost effective model of skill development: Industry collaboration for practical training, Australia 1. Ensuring mobility to the students from vocational education to formal schools 2. Australian school-based apprenticeships, which allow students from year 10 to combine completing school and starting an Australian apprenticeship; 3. Full-time Australian apprenticeships wherein apprentice spends the whole week with on-the-job training (about 80 percent of time) in the company and off-the job training with a chosen training provider; 4. Part-time Australian apprenticeships which are often used by small and medium sized enterprises. A minimum number of hours of on-the-job and off-the-job training per week are provided to the apprentice (e.g. 15 hours per week). 5. Under the apprenticeship system, a legal contract between an employer and an apprentice is necessary, which determines the training wage and conditions. Apprenticeship wages differ according to the level of qualification, training year, industry and the type of apprenticeship (schoolbased, part-time or full-time). In addition, the employer has to determine a training plan with details about on-the-job and off-the-job training, which has to be endorsed by the chosen training provider. Australia s VET system is having strong influence of industrial bodies on VET policies and priorities, which enables matching of skills training to the industry requirements Full time and part time apprenticeships offered 6. Vocational Training through social integration approach for the unsuccessful students in the secondary and/or higher secondary schools 7. The system allows recognition of prior learning. Registered Training Organisations (RTOs) would recognize qualifications and statements of attainment which have been issued by other RTOs. Also, if one already has competencies achieved from prior learning, the assessment and certification will be done directly, reducing the training period and facilitating the switch between qualifications. Brazil 1. Large coverage of the students at the secondary education level in VET 2. Creation of new slots for vocational training to the existing workforce 3. Skill development modules offered for those who don t have any formal education 4. Socially inclusive policy to include the disadvantaged into the ambit of skill development Singapore 1. About 89 percent of funds to be raised by the local government 2. Easy mobility between the vocational training and formal education 3. Active role of the government in prioritizing the themes for the skill development and allocating the same to the skill training institutes 4. Social inclusiveness to cater to needs of disadvantaged and the elderly in the community China Page 20 of 69

1. Technical Vocational Education and Training (TVET) a comprehensive system to meet the needs of vocational education and training at different levels Provided legal framework through The Vocational Education Law of 1996 2. Market-oriented approach by incorporating methods such as learning and practice, learning while working, emphasizing on practical and vocational competence skills 3. Students should spend one year on workplace training during their upper secondary programme 4. Incentives to encourage industry participation in vocational training, for instance allotment of land at subsidized prices, and preferential treatment in case of award of government projects 5. Decentralised and locally driven skill development initiatives. Local Government and Village Collective will have a major role in deciding a part of the curriculum that is determined locally at the school level with the help of local enterprises 6. Secondary and tertiary vocational education and various training programmes has been planned such that vocational education is not perceived as a dead-end 7. For rural workers engaged in agriculture, government provides applied technical training in agriculture which includes green certification training and entrepreneurship training 8. Active participation of the industry in curriculum design 9. Ensuring the quality of the teachers through industry exposure 10. Social Integration Scheme to mainstream the disadvantaged section of the society through skill development initiatives by providing scholarship for poor students to continue in VET schools) Page 21 of 69

3 Strategic Analysis of the Sector in Karnataka 3.1 Analysis of growth drivers The NSDC study reports that Karnataka is likely to have an incremental demand for 8.47 million persons and incremental supply of 8.16 million persons between 2012 and 2022, resulting in a supply gap of 0.31 million persons. It is estimated that about 20-30 per cent of the new entrants into the workforce from the educational institutions is unemployable thereby increasing the supply gap from 1.9 million to 2.7 million persons. According to the study on Skill Gap Analysis for the districts of Karnataka conducted by NSDC, the following trends are projected incremental increase in employment across 19 trends between 2012 and 2022. The table below provides snapshot of these trends: Table 12: Incremental increase in employment for Karnataka between 2012 and 2022 11 Sectors Incremental employment 2012-22 Minimally skilled Semiskilled Skilled Highly skilled Agriculture and allied 1,618,503 1,347,995 201,480 36,658 32,370 Auto and Auto component 58,298 5,830 37,893 11,660 2,915 BFSI 269,636-161,782 80,891 26,964 Building, Construction 1,364,835 409,450 682,417 204,725 68,242 industry and Real Estate Chemicals & Pharmaceuticals 9,634 1,927 2,890 2,890 1,927 Construction Materials and 95,760 9,576 62,244 19,152 4,788 Building Hardware Education and Skill 379,100 - - 341,190 37,910 Development Electronics and IT hardware 15,535 1,554 7,768 5,437 777 Food Processing 41,417 12,425 12,425 12,425 4,142 Furniture and Furnishings 22,125 8,850 8,850 3,319 1,106 Healthcare Services 619,975-61,998 433,983 123,995 IT & ITES 1,430,938-715,469 643,922 71,547 Media and Entertainment 68,052 13,610 40,831 10,208 3,403 Organised Retail 234,536 23,454 164,175 35,180 11,727 Textile and Clothing 149,250 29,850 89,550 22,387 7,462 Transportation, Logistics, 639,702 127,940 371,027 127,940 12,794 Warehousing and Packaging Tourism, Travel, Hospitality & 1,356,186 271,237 922,206 135,619 27,124 Trade Unorganised 90,129 18,026 52,275 18,026 1,803 Mining 12,523 2,505 7,514 1,252 1,252 Total 8,476,134 2,284,228 3,602,795 2,146,865 442,246 From the above table, building and construction industry and tourism, travel and hospitality are the emerging sectors for skill development and employment, after agriculture. Karnataka being a natural resource endowed state, it has lot of potential for tourism and hospitality industry which could be 11 NSDC Skill Gap Report for the Districts of Karnataka 2015 Page 22 of 69

potential employment generating sector. Though the state has been the hub for manufacturing and industrial activity, the state has witnessed a growth in furnishings, health care services, organized retail and transportation and logistics which could be sources of employment with appropriate skill training. 3.2 Analysis of demand and supply of skilled labour force The current work force of Karnataka is put at 27.99mn which is about 45.8 percent of the total population. The labour force in this is about 28.30mn accounting to 46.3 percent. Individuals in the working age group of 15 to 59 years is about 36.68mn amounting to 60 percent of the population but only 45 percent of them are working. Out of the current stock of labour force in the state which is an estimated 27.7 million people, about 85.6 percent are either unskilled or minimally skilled. About 6.5 percent of the labour force is semi-skilled, 4.3 percent is skilled, and the remaining 3.6 percent is highly skilled labour force. In the next decade, there would be a maximum demand for semi-skilled workers at 43 percent of the total incremental demand. This is followed by minimally skilled workers at 27 percent, skilled workers at 25 percent and highly skilled workers put at five percent. About the students coming to join the workforce from different educational institutions, it is estimated that between 2012 and 2022, about 8.16 million persons are the new entrants into the state s workforce. Of these, about 43 per cent will be minimally skilled, 40 per cent will be semi-skilled, 17 per cent will be skilled and the remaining about one per cent will be highly skilled. According to the Skill Gap Analysis Report for districts of Karnataka and IMaCS Analysis, the following are the projections for incremental increase in the requirement of human resources across minimally skilled, semi-skilled, skilled and highly skilled categories of the workforce Demand Supply Gap in Karnataka, 2012-2022 (figures in Lakhs) Highly skilled 0.5 3.9 4.4 Skilled 7.1 14.4 21.5 Semi skilled 3.8 32.2 36 Minimally skilled 11.8 22.8 34.6 0 5 10 15 20 25 30 35 40 Deficit Supply Demand (Source: NSDC Skill Gap Report for the Districts of Karnataka 2015) Page 23 of 69