By Yuvika Singhal | Economist, QuantEco |Mar 07, 2023
India has witnessed an increase in the female labour force participation rates over the past two decades. However, when compared to countries with similar levels of economic development as India, the growth trajectory has been rather slow. This is largely due to cultural norms and biases that discourage women from entering the workforce. While there is a long journey ahead, a lot will depend on the government and private sector initiatives to empower women and emphasise their contribution to economic growth of the country. Yuvika Singhal, Economist at QuantEco, talks about the current state of female labour force participation in India.
Globally, the labour force participation of women of working age continues to trail that of men. India is no exception. The situation, however, is more concerning in India, with not only one of the lowest women labour force participation rates (LFPR) globally, but a rate that has been moderating for over the last one decade.
From an economic perspective, what this means is that a large part of the workforce remains outside the productive sphere of the economy. The inclusion of this untapped source of potential talent, even in part, can shift the Indian economy’s PPF i.e., the Production Possibility Frontier, sizeably outwards, offering immense economic gains, while being an important component of the so-called demographic dividend.
According to data provided by the International Labour Organisation (ILO), India’s female LFPR has been on a monotonic downtrend, declining from 32.0% in 2005 to 19.2% as of 2021. In addition, the participation rates are persistently low in comparison to our global peers. On a relative scale, India’s female LFPR was ranked at 222nd out of 235 countries for which data was available. Only a handful of Arabic countries trail India, with participation rates even in our less developed neighbours of Pakistan, Sri Lanka, and Bangladesh being higher.
The best-known hypothesis in labour economics, is the U-curve that is typically observed between female LFPR and GDP (Gross Domestic Product) growth. The stylised argument is that at low levels of development, women work out of necessity. But as a country develops, women withdraw from labour markets with income benefits accruing more to men than women. Only at higher stages of economic development, as education levels rise, fertility rate declines, and social stigmas wane, female LFPR tends to rise once again – completing the U-shape trajectory.
Clearly, in India, despite the GDP growth averaging at 6.6% over the decade prior to the onset of COVID-19, accompanied by declining fertility rate and rising levels of education, the female LFPR has surprisingly been on a downtrend.
Reasons for India’s low female LFPR can be attributed to both, supply and demand side factors.
More often than not, a low or declining LFPR is typically seen as a labour supply issue and not a demand issue. However, declining women LFPR in India is also affected by demand side factors, such as:
Several studies have in the past highlighted the need to reassess calculation of female LFPR in India. The low LFPR is believed to overlook women working in the household, which remains an integral part of women's productive activities.
Towards this, the latest Economic Survey (2022-23) stated that, “There is a need to broaden the horizon of measuring work, which constitutes the whole universe of productive activities alongside employment, especially for women. According to the latest ILO standards, limiting productive work to labour force participation is narrow and only measures work as a market product. It does not include the value of women’s unpaid domestic work, which can be seen as expenditure-saving work such as collecting firewood, cooking, tutoring children, etc, and contributes significantly to the household’s standard of living”.
There runs a two-way causality between economic growth and female LFPR. While higher economic growth is expected to propel female LFPR, the improvement in women’s participation can augment an economy’s growth potential by pushing the PPF outwards.
While women’s employment is shaped by a range of multifaceted supply and demand side factors, Indian policy makers have since long rightly focused on education of girl child (in recent years Beti Bachao Beti Padhao program), maternity protection, and child-care needs. To be able to arrest the continuous fall in female LFPR and achieve Prime Minister Narendra Modi’s aims of 50% female workforce by 2047 in Amrit Kaal, some policy measures that can be focused upon:
As we understand the causes and possible solutions to the dismal state of female labour force participation in India, we must now work towards the implementation of possible solutions. This implementation happens at both, the domestic and work front. As we unlearn designated gender roles, responsibilities, and expectations, creating equitable spaces in our homes, we can expect the workplaces to follow suit and make policies that address the equitable distribution of roles. This also works the other way around, as our policies help create equitable opportunities for both men and women to take up responsibilities inside and outside the house. This creates a positive loop that feeds an equitable future.
Yuvika Singhal is an economist with almost 13 years of experience in Indian economic research with specialisation in empirical work in macroeconomics and public policy. Prior to joining QuantEco Research, she has worked with YES Bank and ICICI Bank. She holds an undergraduate and a postgraduate degree in Economics from SRCC and the Delhi School of Economics respectively. She was also awarded the "Global Women Leadership Award" for the year 2022.