India's female labour force participation rate (FLFPR) at 35% is lower than that of peer economies like Vietnam, Indonesia, the Philippines and Bangladesh, where FLFPR ranges from 42% to 68%. For the developed world, FLFPR is 54%. Bridging this gap would mean adding nearly 90 mn women to the labour force, with the potential to increase India's GDP by $700 bn at current productivity levels, and up to $1.4 tn if more women transition into non-farm sectors.
FLFPR is determined by the level of economic development, labour intensity of GDP and female intensity of labour. Restrictive social norms also keep women out of the workforce. World Values Survey 2022 finds that over 34% of respondents in India agreed that men should have greater access to jobs than women when work is scarce, far higher than in the Philippines (25%), Vietnam (7%), and Indonesia (27%). Yet, social norms only explain part of the story.
Availability of jobs plays an equally critical role. Cross-country comparisons reveal that if India had Bangladesh's labour intensity (labour-GDP), its FLFPR would increase by 13%. If India had Bangladesh's female intensity, India's FLFPR would increase by 4%. State-level analysis reinforces this idea. Bihar's low FLFPR of 27% is attributed to restrictive social norms. Yet, contribution of its lower female intensity relative to India is marginal (4%).
Larger gap comes from its low per-capita GDP, which reduces participation by 31%. This loss is largely compensated by the fact that Bihar is more labour-intensive than the national average (20% more). Meaningful gains in Bihar's FLFPR require focusing on growth attributes and large cities to enable its GDP to grow faster, creating a greater demand for labour, which will also benefit women.
A frontal attack on low FLFPR necessitates broader labour market reforms, shifting policy focus from increasing women's share in labour to expanding the overall size and quality of employment.
Make hiring attractive
Nearly 15% of firms in India report labour laws as a major constraint, compared to 3.4% in Bangladesh and 6.4% in the Philippines. Cumbersome compliance requirements and conditions on layoffs for larger firms contribute to this constraint. In most peer economies, there's no such condition. While the recent labour codes are a step in the right direction, further simplification and rationalisation are needed to incentivise firms to choose labour over capital.
Remove bottlenecks
Currently, low-skilled, labour-intensive sectors (e.g., textiles, leather, toys, etc) account for only about 16% of GDP, compared to 20-26% in Bangladesh, Indonesia, the Philippines and Vietnam. India's 20% duty on synthetic fibres, compared to 13% in Bangladesh, erodes India's competitiveness in textiles.
The lesson from Bangladesh is clear: preferential access to global markets, particularly in textiles, enabled the rapid expansion of export-oriented manufacturing and a corresponding rise in FLFPR. India is beginning to move in that direction.
The India-EU FTA is a case in point. Until now, Indian apparel exports to the EU faced tariffs of about 12%, while Bangladesh enjoyed duty-free access. India's exports ($7.2 bn) trail far behind Bangladesh's (about $20 bn). With tariffs set to fall to zero, Indian firms can compete better in a market worth over $260 bn.
But market access alone is not enough. External demand must be matched by domestic competitiveness. Initiatives such as PM MITRA may prove to be a step in the right direction if executed well.
Increase investment in health and education
Successive Aser reports have highlighted persistent weaknesses in students' foundational skills. India's public spending on healthcare stands at a mere 1% of GDP, much below the 3% aspiration.
A demand-led increase in FLFPR, therefore, can set off a virtuous cycle: stronger job creation, higher labour intensity and improved participation rates. Over time, this can help reinforce progressive social norms and enable an even greater FLFPR.
FLFPR is determined by the level of economic development, labour intensity of GDP and female intensity of labour. Restrictive social norms also keep women out of the workforce. World Values Survey 2022 finds that over 34% of respondents in India agreed that men should have greater access to jobs than women when work is scarce, far higher than in the Philippines (25%), Vietnam (7%), and Indonesia (27%). Yet, social norms only explain part of the story.
Availability of jobs plays an equally critical role. Cross-country comparisons reveal that if India had Bangladesh's labour intensity (labour-GDP), its FLFPR would increase by 13%. If India had Bangladesh's female intensity, India's FLFPR would increase by 4%. State-level analysis reinforces this idea. Bihar's low FLFPR of 27% is attributed to restrictive social norms. Yet, contribution of its lower female intensity relative to India is marginal (4%).
Larger gap comes from its low per-capita GDP, which reduces participation by 31%. This loss is largely compensated by the fact that Bihar is more labour-intensive than the national average (20% more). Meaningful gains in Bihar's FLFPR require focusing on growth attributes and large cities to enable its GDP to grow faster, creating a greater demand for labour, which will also benefit women.
A frontal attack on low FLFPR necessitates broader labour market reforms, shifting policy focus from increasing women's share in labour to expanding the overall size and quality of employment.
Make hiring attractive
Nearly 15% of firms in India report labour laws as a major constraint, compared to 3.4% in Bangladesh and 6.4% in the Philippines. Cumbersome compliance requirements and conditions on layoffs for larger firms contribute to this constraint. In most peer economies, there's no such condition. While the recent labour codes are a step in the right direction, further simplification and rationalisation are needed to incentivise firms to choose labour over capital.
Remove bottlenecks
Currently, low-skilled, labour-intensive sectors (e.g., textiles, leather, toys, etc) account for only about 16% of GDP, compared to 20-26% in Bangladesh, Indonesia, the Philippines and Vietnam. India's 20% duty on synthetic fibres, compared to 13% in Bangladesh, erodes India's competitiveness in textiles.
The lesson from Bangladesh is clear: preferential access to global markets, particularly in textiles, enabled the rapid expansion of export-oriented manufacturing and a corresponding rise in FLFPR. India is beginning to move in that direction.
The India-EU FTA is a case in point. Until now, Indian apparel exports to the EU faced tariffs of about 12%, while Bangladesh enjoyed duty-free access. India's exports ($7.2 bn) trail far behind Bangladesh's (about $20 bn). With tariffs set to fall to zero, Indian firms can compete better in a market worth over $260 bn.
But market access alone is not enough. External demand must be matched by domestic competitiveness. Initiatives such as PM MITRA may prove to be a step in the right direction if executed well.
Increase investment in health and education
Successive Aser reports have highlighted persistent weaknesses in students' foundational skills. India's public spending on healthcare stands at a mere 1% of GDP, much below the 3% aspiration.
A demand-led increase in FLFPR, therefore, can set off a virtuous cycle: stronger job creation, higher labour intensity and improved participation rates. Over time, this can help reinforce progressive social norms and enable an even greater FLFPR.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
Shishir Gupta
Senior fellow, Centre for Social and Economic Progress
Aalhya Sabharwal
She is research analyst, Centre for Social and Economic Progress