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A new scheme for skill development of barefoot entrepreneurs

By Yash Budhwar

The Ministry of Skill Development and Entrepreneurship (MSDE), the central authority responsible for the coordination of the government’s skill development initiatives, has proposed a plan that will involve mentoring and Training barefoot entrepreneurs. Barefoot entrepreneurs are self-employed individuals who are engaged in roadside vending, tailoring and other such sundry services. A formal Scheme is being designed to increase the scale of this initiative, once feedback is collected from a pilot project being conducted in Chhapra, in Bihar.

Why is the scheme being implemented?

The scheme is being implemented in a bid to accelerate job creation in a country that is facing severe unemployment and skill shortage. According to Bloomberg, the country will require an extra 110 million workers by 2022. Although the projected amount of people going to enter the workforce by that time is 105 million, only 5% of the current workforce is skilled enough for jobs of that level.

The government is seeking to empower the barefoot entrepreneurs by training them in skills that enable them to expand their operations and hence, increase the employment opportunities for other individuals. Such a scheme will also enable such entrepreneurs to get inducted into the formal sector by absorbing them into the Goods and Services Tax (GST) scheme.

Potential advantages of the scheme

The scheme complements the other major skill development initiative of the MSDE, like the Pradhan Mantri Kaushal Vikas Yojana (PMKVY). PMKVY is aimed at increasing the productivity of daily wage earners by providing them industry-level aptitude training. While PMKVY aims to provide industry-relevant training to those looking to work for an organisation, the most recent scheme of MSDE envisages to skill the self-employed section of the informal labour force, a section that comprises of 56% of the total informal labour force of the country. Together, these two sections (the casual daily wage labourer and the self-employed) comprise nearly 90% of the informal labour force (based on the most recent NSSO survey conducted in 2011-12). Thus, these schemes could provide for skill development of the majority of the informal labour force, if implemented appropriately.

Another possible advantage is the potential for a focus on practical and contextually relevant training to the self-employed individuals. As opposed to a formal educational training, such training allows the MSDE to focus on improving the performance of the self-employed establishments. An emphasis on formal educational training does not necessarily have an end-result in sight for the respective individuals in terms of an avenue for income earning. On the other hand, an emphasis on practical training might incentivise the self-employed individuals to incorporate their learning from the training, since their avenue for income earning is already present and they will thus be motivated towards improving their establishment. A sense of ownership and responsibility that emanates from having one’s own establishment might also improve the performance of these self-employed individuals.

Potential pitfalls of the scheme

The PMKVY scheme has been called into question over providing end-results for the people enrolled in its training programs. Until July 2017, less than 10% of the candidates have received placement offers out of a total of 30 lakh enrolled in its programs. The proposed scheme of the MSDE will need another metric to judge its effectiveness, a comparison of self-employed establishments over time perhaps. Also, as explained above, it should be able to deliver more effectively on the objectives promised. However, appropriate support policies that can provide for the expansion and growth of self-employed establishments, such as those providing financial inclusion and access to a market, will need to be implemented as well. An initiative aiming to provide financial inclusion has already been launched under the MSDE with the Micro Units Development and Refinance Agency (MUDRA) bank in 2015. It provides loans at low rates to micro-finance and non-banking financial institutions, which then provide credit to micro, small and medium enterprises, such as the establishments for self-employed individuals.

If the government is implementing this scheme with the goal of formalising the establishments of
self-employed individuals, then there ought to be some policies and conditions which will incentivise such
individuals to expand and induct themselves into the formal economy. Such policies will include access
to formal financial channels and tax breaks or cuts. The government’s recent move to lower the Goods and Services Tax (GST) rate on 178 items might boost induction into the formal economy. An increased revenue collection from GST in October is perhaps a sign that such incorporation is already taking place.

Featured Image Source:  CIFOR via Visual hunt / CC BY-NC-ND

This post first appeared on The Indian Economist | For The Curious Mind, please read the originial post: here

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A new scheme for skill development of barefoot entrepreneurs


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