New Delhi: Planning Commission Deputy Chairperson Montek Singh Ahluwalia indicated today (Nov 13, 2006) that shortage of skilled labour could prove to be a major bottleneck to achieving higher growth targets in the near future.

"We have done exceptionally badly in the area of developing skills in the past, and this will prove to be a constraint towards achieving growth rate of nine percent," Ahluwalia said, addressing the Employment Summit 2006 here.

The existing education system in terms of developing skills has become totally dysfunctional, and apart from the government the private sector can play an important role in improving it, Ahluwalia suggested.

"The prime minister has asked the Planning Commission to work for setting up a Skill Development Mission during the 11th plan period (2007-12). The government has decided to revamp about 500 industrial training institutes as part of its commitment to improve the system," he added.

He emphasised the need to increase employment opportunities in the non-farm and organised sector.

"If we are projecting nine percent GDP growth rate, one of the benchmarks is that the share of the organised sector should be high and it should not depend on the Government," he said.

At present about eight percent of the total employment is in the organised sector and two-thirds of that in the public sector. There is huge scope for improving employment opportunities in the organised sector, the Planning Commission deputy chief said.

In this regard, reform in the labour laws was a key issue, he added. "The government doesn't support the 'hire and fire' approach. But there are lots of areas where we need far greater flexibility in terms of labour laws.

"There is need for flexibility in labour laws to increase employment in the organised sector. Moreover, we cannot follow degrees of flexibility that is different from the rest of the world," Ahluwalia said.

However, he agreed that there is no consensus over this contentious issue.

"At present there is no consensus on the issue of flexibility in the field of labour laws. There is a need to build consensus on it if we want to move ahead," Ahluwalia said.

The recommendations of the summit, organised jointly by the Confederation of Indian Industry (CII) and the Planning Commission, will be sent to the Planning Commission.