More women in workforce is key to India becoming a $5 trillion economy

For India to become a $5 trillion economy, reducing gender disparities within the economic domain must play a pivotal role in economic growth and development. Despite recent economic advances, India’s gender balance in the economic domain is among the lowest in the world. Correcting this imbalance is crucial for India’s development,
fostering both economic growth and gender equality.

Reducing gender disparities has emerged as a key driver for inclusive economic growth over the last century. The increased role of women in economic growth takes many forms: increased participation in the labour force, diminished discrimination and wage gaps, as well as practices that bolster women’s advancement into leadership and managerial roles. By empowering half of the potential workforce, tangible economic benefits unfold beyond the horizon of gender equality.

However, gender disparities in India remain deeply entrenched, with female labour force participation rates lagging significantly behind several Sub-Saharan African countries.

The Indian workforce currently consists of less than 40 million women in comparison to over 360 million men, and women are paid less even when they perform equal-value jobs as men. Women have the highest incidence of poverty, the worst health conditions, and an elevated risk of violence. Despite India’s status as the world’s most populous country, women’s representation in leadership roles remains glaringly inadequate.

Gender disparities are rampant across states and industries. While some southern states, like Karnataka, Kerala, and Tamil Nadu, show an improving trend in gender equality, substantial disparities persist in states like Bihar, UP, Haryana, and Gujarat. Notably, the divide is more pronounced within the services sector compared to manufacturing.

Female ownership shares of enterprises in the services sector barely reach 10% in states with the highest female ownership rates, like Kerala, Tamil Nadu, and Andhra Pradesh. Female ownership share remains much lower in states like Rajasthan, Bihar, Orissa, and Uttar Pradesh, at 6% or less.

However, female ownership rates of enterprises in major cities tend to be higher than overall state averages. Gender disparities are worse in rural areas, where limited physical and human infrastructure, along with prevailing family norms, hinder the attainment of gender equality. Differences in education and early childhood nutrition can also explain the persistence of gender disparities in India.

Although change is underway, it is slow. Policymakers can expedite the journey towards gender equality from a century to a mere decade by promoting women’s entrepreneurship and creating job opportunities for women. It is estimated that achieving gender equality in economic participation could boost India’s GDP by nearly $1 trillion.

Huge gender disparities persist in women’s entrepreneurship rates in both the manufacturing and service sectors. Female entrepreneurship rates remain extremely low at 2% or less in industries related to computers, motor vehicles, fabricated metal products, machinery, and equipment. Female shares are higher in traditional industries like chemical products, tobacco products, and paper and paper products. Among service industries, female ownership shares are high in industries related to sanitation and education. But industries related
to research and development, water transport, and land transport have the lowest rates at 1% or less.

What explains the huge gender disparities in the economic domain? An examination of more than 600 districts in India shows that poor physical and human infrastructure are the biggest barriers to achieving gender equality in the economic domain. This is evident in both the manufacturing and service sectors. Higher female ownership among incumbent businesses also predicts a greater share of subsequent women entrepreneurs.

Moreover, higher female ownership of local businesses in related industries (similar labour needs, input-output markets) predicts greater relative female entry rates. Gender networks thus clearly matter for women’s economic participation. There is no doubt that gender empowerment can be the escalator to realising human potential and creating a robust platform for growth and job creation.

There is huge potential for achieving gender parity in the economic domain. Physical infrastructure, especially transport and electricity, is the most relevant policy issue, as poor and inadequate infrastructure affects women more than men, and women face greater constraints in geographic mobility imposed by safety concerns and/or social norms. Female connections in labour markets and input-output markets also promote
more women entrepreneurs. These linkages are observed in both manufacturing and services.

Reducing the time required for unpaid household responsibilities requires scaling up investments in infrastructure. There is strong evidence that those states in India that have improved physical infrastructure show an improving trend in female business ownership share. Lack of access to certain types of infrastructure services (transport, access to water, and sanitation) are shown to affect women more than men. Transport infrastructure and paved roads within villages are especially important. Travel in India can be limited, dangerous, and unpredictable, and women face greater constraints on geographic mobility imposed by safety concerns and/or social norms. States with better transport infrastructure alleviate one of the major constraints for female entrepreneurs in accessing markets.

In addition, better electricity and water access reduce the burden on women in providing essential household inputs for their families and allow for more time to be directed towards entrepreneurial activities. Female literacy rates and general education levels are also important. Marshallian linkages across industries from incumbent female-owned businesses, as well as female connections in labour markets and input-output markets, are also important (see Local Industrial Structures and Female Entrepreneurship in India).

Empowering half of the potential workforce has significant economic benefits beyond promoting gender equality. While achieving economic equality sometimes requires tough choices (e.g., progressive taxation that may discourage effort), the opposite is true here. Unlocking female empowerment and entrepreneurship will promote a more dynamic economy and economic growth.

For India to become a $5 trillion economy, reducing gender disparities in the economic domain will need to play a bigger role in economic growth and development. Despite recent economic advances, India’s gender balance in the economic domain remains among the lowest in the world. Improving this balance is an important step for India’s development and its achievement of greater economic growth and gender equality.

(The writer has taught economics at Oxford University and worked for United Nations and World Bank)