DESCRIPTION

The Government of Odisha requires both financial and technical assistance to achieve the desired outcomes from skills development programs and achieve employment targets. The proposed project will help the Government of Odisha to develop a 10-year road map for skills development. This in turn will help to develop a phased market-responsive and quality assured, sustainable skills development system in Odisha in line with a long-term vision envisaged in the National Skill Development Policy, 2009 and various initiatives and strategies that have evolved in the past few years at the central and state level. This is consistent with the country partnership strategy, 2013 2017 , and the country operations business plan, 2013 2015, for India.

PROJECT RATIONALE AND LINKAGE TO COUNTRY/REGIONAL STRATEGY

The proposed project will increase the employability and productivity of young people in Odisha through substantial increase and improvement in market-responsive skills training. The project will support the Government of Odisha (GoO) in providing relevant skills to its working age population, specially youth and disadvantaged groups, in line with its existing and emerging economic structure and labor market. In doing this the project would adopt an integrated approach to address issues of underemployment, employability and/or unemployability in agriculture, service sector, industry, and in micro, small and medium enterprises (MSME). The project will also reach out to the large numbers of people working in the unorganized and informal sectors, to build their skills and increase their employment outcomes. Sustained investment to lift skills across the State can, over time, shift Odisha from being an exporter of unskilled labor towards a state known for its skilled and job-ready young people.

The core problem is the low employability of the workforce associated with low skills, weak synergy with industries, fragmented skills ecosystem, and weak capacity. While overall unemployment in Odisha is not much higher than the national average (2.51% compared to 2.32% nationally), youth unemployment (6.47% compared to 6.12% for all India) and particularly underemployment (23.5% compared to 17.6% for all India) rates are high. India's 12th Five Year Plan (2012 2017) focuses on skills development aligned with demand, and promotes growth in manufacturing, so that underemployed labor force can speedily move from low-paid farm jobs to better paid manufacturing and services jobs.

Traditionally, Odisha has been largely an agrarian state, and agriculture still accounts for around 60% of peoples' stated economic activity. However, the economic contribution from agriculture to state gross domestic product has steadily declined from 36.5% in 1990 to 17.5% in 2012 2013, while the contributions from services and manufacturing sectors have increased to 54% and 28% of state gross domestic product, respectively. The role of the micro and small and medium enterprises is limited although its potential remains very high particularly for generating self-employment and expanding jobs. The training system needs to rapidly reorient towards these new economic opportunities.

India's weak human capital and skill base is a key binding constraint which needs to be addressed urgently to reap its demographic dividend and facilitate inclusive growth in labor surplus states like Odisha. With nearly 47% of the population in Odisha below 25 years, the demographic dividend of a young population from more schooling and skilling is enormous. With a visible demographic shift from agriculture to services and manufacturing sectors, reskilling is essential to efficiently facilitate the transition of the workforce from farm to nonfarm activities (e.g. construction). As per 2009 10 data, the organized sector in Odisha reportedly employed only 731,000 individuals, of which women comprised only around 16%. Around 90% of the working population was in the informal sector which implies lack of income security, high sensitivity to natural and economic disruptions, casualization and marginalization. Of the 10% employed in the organized sector, the vast majority (83.2%) were in public sector jobs, which has limited prospects for further growth. Two key messages emerge: significant effort must go to increasing private sector jobs in the formal economy and efforts to add value to the informal economy. Higher skills of the population can assist both objectives.

A significant size of Odisha's population is marginalized with the rural population of around 83%. Around 15 million people live below the poverty line and close to 9 million people belong to tribal and/or remote areas. The urban growth in Odisha between 2001 2011 was 26.80% (31.8% for all India) with an urban share of the population in the state of only 16.68% (31.6% for all India). With the demographic shift from rural to urban areas expected to grow faster, and the state government's increasing focus on improving infrastructure and development of emerging sectors such as tourism, banking, information technology (IT) and IT enabled services (ITES), it is important to adopt a two-pronged strategy: (i) introducing recognition of prior learning (RPL) and (ii) providing a menu driven approach to ensure greater inclusivity of skills development programs.

Efforts are needed to boost women's labor force participation rate, which currently stands at 28% compared to men's 60%. Similarly, literacy rates are low for women (52.2% compared to 74.1% for men); it is lower (43.8% compared to 72.4% for male) for scheduled castes and worst (33.4% for women and 59.9% for men) for scheduled tribes. Although declining, the dropout rates in secondary education remain high at 49.5%. Only 6% (10% national) of the population has diploma, certificate or a graduate and above degree, and only 52% of those who pass the secondary level enroll in higher education. A significant population is seeking jobs outside of the state and engaging in formal education. An integrated and menu-driven approach to skills development is therefore crucial for Odisha to cater to the diverse working age population, especially that of females, tribal youth and other weaker sections of society with an objective to gradually bring them into the formal economy through effective integration with the growth priorities and strategies of the state.

Odisha's economy is growing at around 9%, with the thrust coming from a steadily strengthening services sector and foreign investments in extractive industries and related large manufacturing facilities. The total workforce demand for skilled jobs in Odisha is expected to grow from 7.6 million in 2011 to 13.6 million by 2026. There is significant requirement of highly skilled workforce in banking, financial services & insurance, IT and ITES. Projected demand for workers in the top 10 sectors includes 200,000 each for construction and textile/apparel; 150,000 each for driving and manufacturing; and 50,000 each for health (paramedics), security guards, hospitality, IT & ITES, retail, and miscellaneous (telecom, banking, agriculture, etc.). The supply side needs to adapt to cater to these emerging needs.

Odisha has been proactive in taking initiatives to address its skills shortages. To address its problems of underemployment and youth unemployment, the Government of Odisha set up a high level Odisha State Employment Mission (OSEM) in 2005 06 chaired by the Honorable Chief Minister. Since then it has trained over 150,000 people. OSEM has taken several initiatives which include facilitating skills-gap analysis, preparation of a strategy paper, identifying key sectors, drafting of a detailed plan for rationalization of trades and enrollment capacity for industrial training institutes (ITIs), polytechnics and skills development centers (SDCs), implementing placement linked training programs through public private partnership mode, and arranging job fairs.

As part of GoO's expansion plan and drawing lessons from various reform initiatives at the national and state level in the past decade, the Directorate of Technical Education and Training (DTET) is in the process of expanding its network of technical and vocational education and training (TVET) institutions by introducing new and more flexible models of TVET institutions that can cater to emerging labor market needs through public-private partnerships. There is also recognition of the need to harmonize with the central initiatives in establishing sector skills councils by the National Skill Development Corporation and operationalizing the National Skill Qualification Framework by the National Skill Development Agency.

IMPACT

Increased employability and productivity of Odisha's working age population

OUTCOME

Improved employability of Odisha's youth in project areas

CONSULTING SERVICES

A total of 42 person-months, including 10 person-months of international and 32 person-months of national consultants were provisioned under the revised PPTA. Most of these inputs have been completed. The project is now in an advance stage. The draft design is available.

PROCUREMENT

All procurement has been carried out following ADB procedures (March 2013, Procurement Guidelines as amended from time to time).

Loan: Odisha Skills Development Project
Ordinary capital resources US$ 102.00 million

TA: Odisha Skills Development Project
Japan Fund for Poverty Reduction US$ 2.00 million

ACCOUNTABILITY MECHANISM OF ADB

The Accountability Mechanism is an independent complaint mechanism and fact-finding body for people who believe they are likely to be, or have been, adversely affected by an Asian Development Bank-financed project. If you submit a complaint to the Accountability Mechanism, they may investigate to assess whether the Asian Development Bank is following its own policies and procedures for preventing harm to people or the environment. You can learn more about the Accountability Mechanism and how to file a complaint at: http://www.adb.org/site/accountability-mechanism/main

CONTACTS

Responsible ADB Officer Lee, Sunhwa
Responsible ADB Department South Asia Department
Responsible ADB Division Human and Social Development Division, SARD
Executing Agencies
Skill Development and Technical Education Department
Odisha State Secretariat, Sachivalaya
Marg, Unit-2 Bhubaneswar, Odisha-751001