A growth story that needs women at work

India aspires to become a developed country (Viksit Bharat) by 2047, yet youth unemployment is already double the rate of 2012. India, especially the government, may be forced to recognise the weaknesses of India’s economy due to the West Asia war shock. However, weakness pre-dates this exogenous shock. Policy-induced shocks from 2016 (demonetisation, a poorly designed Goods and Services Tax, NBFCs, COVID-19 pandemic management) to the economy had already reversed structural change (rise in farm employment, falling manufacturing share of gross value added and in employment); non-farm job growth had slowed. The economy became more unequal, and hence aggregate demand collapsed, and with it investment/GDP ratio. So, GDP growth is much slower (even if government figures of 6.2% p.a. are believed (it is actually at best 4.5%, as the former Chief Economic Adviser recently argued).

An engine of growth

Further, India’s growth story will remain incomplete without increasing the work participation rate (WPR) of half the population, i.e., women. In a new study, we estimate that a 10-percentage-point increase in India’s female WPR could add nearly two percentage points to GDP growth, making women’s employment one of the strongest drivers of economic growth. To sustain rapid growth of 8%-9% and emerge as a global economic power, the nation must harness the immense potential of its youth, especially young women.

Increased female WPR could contribute to economic growth in multiple ways. First, it increases the overall labour supply, thereby expanding productive capacity. When more women enter paid employment, household incomes rise, consumption increases, and savings improve. Higher household incomes also lead to better nutrition, education, and healthcare for children, thereby strengthening long-term human capital. Women’s work participation can also improve productivity and innovation. Based on cross-country evidence, Nobel laureate Claudia Goldin argues that gender-diverse workplaces are often more efficient, creative, and competitive. Including women in the workforce is not merely a welfare measure but also a strategy for enhancing national productivity.

However, the work participation rate (WPR) of women in India remains below 30% — among the lowest in the world, comparable to that of countries such as Saudi Arabia and Yemen and West Asia. India’s female labour force participation rate (LFPR) is low by international standards, even when compared with countries at similar levels of per capita income. Worse, it declined steadily between 1983 and 2018. As overall job growth in both the farm and non-farm sectors fell between 2012 and 2018, how did women fare? This is a critical question, especially since women are now much better educated than earlier.

Decline in women’s work

In the 1980s and during the early 1990s, the WPR for women was high, primarily due to high participation in agricultural activities. However, this trend began to decline as economic growth and structural transformation led to a shift away from agriculture from 2004-05 to 2012. Many rural women withdrew from the workforce due to mechanisation and reduced demand for manual labour.

Fortunately, this period also saw a rise in educational attainment among young women, leading to increased school attendance. In other words, the Indian economy experienced a downward movement in female WPR in the first half of the U-shaped curve until 2018-19, consistent with the argument of Claudia Goldin.

Much has been made by government economists of the increase in women’s work participation in India, post 2020. However, this increase built upon a GDP growth slowdown since 2017. Further, COVID-19 had induced economic distress, and large-scale return migration from urban to rural areas. With male workers losing urban employment and moving back to villages, women were compelled to intensify their role in subsistence agriculture and allied activities, often as unpaid family labour (UFL). This surge in UFL reflected a “distress-driven feminisation of agriculture”, as women entered or remained in insecure, informal, and unremunerated agricultural work, due to shrinking non-farm opportunities and reinforced gender norms that limited mobility. The share of such work was falling from 1983 to 2012, as was the absolute number of women in such work. The collapse of non-farm work for men and women now meant that adult, poorly educated women returned to agriculture.

The structure of India’s economic growth has also contributed to weak female employment generation. Much of India’s recent GDP growth has been concentrated in capital-intensive sectors such as finance, information technology, and organised manufacturing, which do not absorb large numbers of workers. Labour-intensive sectors such as textiles, food processing, garments, and small-scale manufacturing saw a fall in absolute terms in employment between 2013 and 2019. In fact fewer women were employed in manufacturing in 2019 than in 2004 which shows how manufacturing jobs collapsed, despite all the hype about “Make in India” and Performance-Linked Incentives for manufacturing. It was not until 2022 that manufacturing work for women rose to a level found in 2004. In much of India, manufacturing, or women’s work has not received sufficient policy support.

The north-south divide

We show that young girls’ unemployment is much higher than for young men. However, there is a real north-south divide, as highlighted in the book, India Out of Work. What is achievable is demonstrated by Tamil Nadu, which has been one of India’s fastest-growing States. More than 40% of India’s women factory workers are employed in Tamil Nadu. This is remarkable, given that Tamil Nadu accounts for only about 5%-6% of India’s population. This concentration is driven primarily by the State’s strong presence in textiles and garments (especially in Tiruppur and Coimbatore), footwear, electronics assembly (Sriperumbudur), and automobiles and auto components, as well as by higher female literacy, greater mobility, and well-developed hostel and transport facilities for women workers.

Similarly, Hindi-belt States need to invest in the health (not insurance-based) and public education for all, especially of girls and women, to reduce higher-than-African level malnutrition and stunting rates — as the Southern states have done. They can then also see similar outcomes. There is no chance for India being ‘Viksit’ without gender equality in all dimensions, especially in north India.

Some increase of female WPR (who re-entered agriculture) across India since 2020 was due to older adult women engaging in animal husbandry and poultry farming — a welcome development for household incomes.

However, what about educated young girls? The gross enrolment rate at the secondary level was universalised between 2010 and 2015, with gender parity achieved even in rural Uttar Pradesh and Bihar. However, educated young women face high and rising unemployment rates.

Worse, the number of young women (aged 15-29 years) who were neither looking for work nor in education, was under 70 million until 2004. It increased to 84 million in 2012 and then rose to over 100 million by 2018. Bihar’s female WPR is only 15%. Hence, India will remain out of work, and cannot become a developed country by excluding half its population from productive employment.

Santosh Mehrotra was a former Professor of Economics, Jawaharlal Nehru University, and with the Planning Commission. Jajati Keshari Parida is a Professor of Economics, University of Hyderabad. The writers are the authors of the book, ‘India Out of Work: Rethinking India’s Growth Story’