With an 8.2 per cent gross domestic product (GDP) growth during the financial year 2023-24, India maintained its position as the fastest-growing major economy in the world. Positioned as the world's fifth-largest economy with rapid growth across sectors, an increasing number of global GCCs, manufacturing giants, and semiconductor companies are establishing their presence in the country.
The startup and micro, small and medium enterprises (MSMEs) sectors have further propelled this growth by sparking innovation, agility, and job creation, particularly in niche and emerging sectors. India has solidified its position as the global startup hub, hosting 1,17,254 recognised ventures and creating over 12.42 lakh direct jobs.
Concurrently, the estimated 64 million MSMEs employ nearly 23 per cent of India’s workforce, underscoring their critical role in the country's economic fabric. The 40 million MSMEs registered through the Udyam certification have reported nearly 190 million jobs, a remarkable increase from 90 million in 2022. By providing platforms for entrepreneurial talent and fostering a culture of innovation, startups contribute to technological advancements and market disruptions.
Similarly, with their vast presence and diverse offerings, MSMEs bolster employment opportunities, support local economies and significantly contribute to GDP growth. Together, these enterprises form the backbone of India's economic dynamism, driving competitiveness and sustainable development.
With the rapid expansion, there is a corresponding surge in demand for skilled workers. Apprenticeships are a proven pathway for addressing skill deficits, and they offer the dual advantage of On-the-job training combined with theoretical knowledge rooted in the core job role. India has made remarkable strides in the evolution of apprenticeships, with programs covering almost all major industries and the latest technologies like AI, robotics, automation, data security, drone technology, etc. Apprenticeships have been growing at an impressive rate of 30 to 35 per cent annually, with nearly a million apprentices engaged in 2023-24.
Despite this growth, apprentices currently represent only 0.14 per cent of India's workforce, significantly below the 3-4% seen in developed economies. As India progresses towards becoming a developed nation, there is a strong case for scaling up apprenticeship programs to approximately 20 million participants, matching international benchmarks. These apprenticeships are seen as green shoots in India's workforce development landscape. Given India's 64 million SMEs, if 30 per cent were to hire just one apprentice, this goal could be feasibly achieved.
Driving Scale: Apprenticeships As Catalysts For MSME And Startup Expansion
Apprenticeships serve as a pivotal strategy, offering practical training and industry-specific skills that bridge the gap between theoretical education and practical workplace requirements. For MSMEs and startups, these programs present a strategic opportunity to address both current challenges and future growth prospects effectively.
Sustainable and Cost-Effective Talent Acquisition: Apprenticeships provide a sustainable means to cultivate talent internally by offering structured training and hands-on experience. This approach reduces reliance on expensive recruitment processes and mitigates turnover rates. Companies can potentially cut hiring costs by up to 50 per cent and decrease attrition costs by 10 to 25 per cent, as apprentices tend to stay longer with companies invested in their development. The immediate integration of apprentices into operations can boost productivity by 20 to 25 per cent, enhancing the return on investment in apprenticeship programs. Moreover, companies can leverage CSR benefits by hiring apprentices above the mandated 2.5 per cent of the workforce, promoting sustainable growth and reducing labour costs.
Customised Skill Development to Meet Workforce Demands: In the face of challenges posed by AI and automation, apprenticeships provide structured pathways for individuals to gain hands-on experience and specialised training that align with evolving industry demands. As AI reshapes job roles, apprenticeships are instrumental in preparing a workforce skilled in emerging technologies such as AI, machine learning, cybersecurity, and IoT. Government initiatives like the MSME Digitalisation Scheme and Niti Aayog's AI for India strategy are pivotal in integrating these technologies effectively, fostering a skilled ecosystem essential for sustainable growth across sectors.
To achieve India's ambitious goal of creating over ten crore jobs by 2030, specific sectoral targets have been set: approximately six crore jobs from MSMEs, three crores from large industry conglomerates, one crore from startups, and 25 lakh from government departments and NGOs. The National Employment Policy must adopt a proactive, quarterly target-based approach to realise these objectives. This entails establishing startup incubation centres and technology development hubs in collaboration with industries at educational institutions, enhancing employability, and fostering innovation. Additionally, forging robust university-industry linkages and promoting R&D in industries will bolster their capacity to absorb skilled talent, which is critical for navigating an economy increasingly shaped by AI and automation.
3. Promoting Inclusivity and Diversity: Apprenticeship programs play a pivotal role in the skill development and capacity-building of the female workforce within the MSME sector, complementing ongoing initiatives aimed at empowering women entrepreneurs. Currently, women represent approximately 21% of apprentices, highlighting a significant opportunity for MSMEs to enhance female participation and foster economic empowerment.
The Ministry of MSME has implemented several measures to support women-owned MSMEs, including special drives under the Udyam Registration Portal (URP) for registering women-owned businesses. Since the inception of the Pradhan Mantri Mudra Yojana (PMMY), which provides collateral-free microcredit for income-generating activities, approximately 69 per cent of loans have been sanctioned to women entrepreneurs. The amended Public Procurement Policy mandates central ministries/departments/undertakings to procure at least 3 per cent of their annual purchases from women-owned micro and small enterprises.
Initiatives like "SAMARTH" provide skill development and market development assistance, benefiting over 7,500 women in rural and suburban areas. Women entrepreneurs receive special considerations such as a 20 per cent seat allocation in free skill development programs, participation quotas in MSME Business Delegations for exhibitions, and discounts on processing fees under schemes like the National Small Industries Corporation's initiative.
Moreover, the Ministry runs the ‘Skill Upgradation and Mahila Coir Yojana’ to train women artisans in the coir sector, and the Prime Minister’s Employment Generation Programme (PMEGP) offers credit-linked subsidies to create self-employment opportunities through micro-enterprises. Since July 2020, women-owned MSMEs have accounted for 20.5 per cent of all registrations under the URP, contributing significantly to employment generation.
Despite these advances, women entrepreneurs continue to face challenges such as funding constraints, limited access to financial services, societal barriers, and complex regulatory procedures. However, initiatives like "Startup India" and support networks through organizations like FIWE and the National Association of Women Entrepreneurs are fostering a conducive environment for women-led businesses. Women increasingly leverage digital platforms for operations and enter diverse fields beyond traditional domains. Apprenticeship programs play a crucial role in addressing these challenges by providing hands-on training that enhances practical skills and boosts confidence among women.
These programs offer structured pathways for women from marginalised communities and rural backgrounds to improve their economic standing while acquiring high-demand vocational and technical skills, further integrating them into the formal workforce. As apprenticeships redefine women's economic roles, they contribute to broader social and cultural changes, empowering women and driving inclusive growth within the MSME sector.
Employee Retention: Apprenticeships can significantly increase employee loyalty and reduce turnover rates within organizations. When companies invest in training and development through apprenticeship programs, trainees tend to develop a strong sense of loyalty. This is because they perceive the company as committed to their career growth and skills enhancement. Studies show that apprentices are more likely to stay longer with the company that invested in their initial training, thereby reducing turnover costs and maintaining a stable workforce.
Creating A Talent Supply Chain Of Fresh Talent: Apprenticeships are a robust mechanism for creating a continuous pipeline of fresh talent into organisations. These programs bring in individuals with diverse backgrounds and perspectives, often injecting innovative ideas and fresh thinking into the business. By nurturing young talent through hands-on training and practical experience, apprenticeships fulfill immediate skill requirements and prepare the workforce for future challenges and technological advancements. This continuous influx of new talent helps organisations stay agile and competitive in rapidly evolving industries.
Furthermore, leveraging the untapped potential of the 64 million Indian MSMEs via apprenticeship training heralds a new era of skill development. Emulating the successful Group Training Organization (GTO) Model of Australia, where third-party aggregators (TPA) or staffing organisations recruit and deploy apprentices across SMEs, offers a dual benefit of practical experience for apprentices and skilled labour for SMEs. To support this model's sustainability, government incentives for TPAs could cover the expenses, thereby overcoming SMEs' budget constraints.
Apprenticeships represent a transformative strategy for India's MSMEs and startups, poised to drive sustainable economic growth and inclusive development. These programs support the rapid expansion of businesses by bridging the skills gap, fostering innovation, and empowering diverse segments of the population, including women and marginalised communities. As India strives to achieve ambitious employment targets and integrate emerging technologies into its workforce, apprenticeships emerge as a critical tool for nurturing talent, enhancing productivity, and promoting long-term stability in the economy.
With concerted efforts to scale up apprenticeship initiatives and promote inclusivity, India can harness its entrepreneurial spirit and technological prowess to propel itself further on the global stage, ensuring that economic progress is equitable and sustainable for all.
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