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Third Eye: Here's why women workforce vital for taking Indian economy from $3.18 trillion to $5 trillion

Third Eye: Here's why women workforce vital for taking Indian economy from $3.18 trillion to $5 trillion

Third Eye: Here's why women workforce vital for taking Indian economy from $3.18 trillion to $5 trillion
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By Aishwarya Sawarna Nir   | Anjinshu Kumar  Jan 19, 2023 1:44:34 PM IST (Updated)

As India is slowly but steadily getting its fertility rate and sex ratio under control, and the education gap between boys and girls is rapidly diminishing - the female labor force participation puzzle is quickly becoming the country’s single biggest problem to resolve.

India’s falling Total Fertility Rate (TFR) has reached below the replacement rate of 2.1 in 2019, which is a remarkable achievement for the country, where women used to have 6+ children only a few decades ago. The country's growing economy is now amongst the top 5 economies in the world based on nominal GDP, however the labour force participation for Indian women is still at an all time low. 

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This worrying trend reflects poorly on the quality of our economic development. Despite rivalling some of the most developed nations in the world in terms of GDP, our per capita income, human development and female labour force participation numbers don’t even remotely match up with those of the other high ranking economies in the world like USA, China, Japan, Germany and UK. 
Doing a very simplistic analysis of these numbers as per modelled ILO estimates for TFR and measuring the percentage change in these economies since 1950s and comparing these numbers with India, paints a disappointing picture. 
CountryTFR 2021% Change since 1950sGDP in trillion $(2022)Ratio of Female Labour Force Participation to Male Labour Force Participation 2021, per 100 menRatio of Female Labour Force Participation to Male Labour Force Participation% change since 1990
GERMANY 1.53-56%3.858623%
INDIA2.03-65%2.6627 (32.2)*-9%
  • The second number is from India’s official national survey the NFHS-5
    However, these countries have also reached the replacement total fertility rate of 2.1 decades ago and had high numbers of working women even in 1990, so it is unfair to compare our growth curve to them. We can look at economies closer home which have reached their replacement rate more recently . Countries like Bangladesh, Malaysia, Thailand, China and South Korea have achieved this feat relatively recently , which is why it made more sense to look at their journey towards replacement rate number and the participation rate for women in their workforce when they achieved this number in the given year .
    For eg. It would be unfair to compare Indian labour force participation rate with that of USA right now , when USA reached its replacement rate of TFR 2.1 decades ago, does it make more sense then to compare its LFPR to Bangladesh or Malaysia which like India have received their replacement rate TFR in the same decade?
    Have a look at the table below :
    Years taken to get to replacement from Fertility = 4Year Reached 2.1 Fertility RateFemale LFPR when fertility reached 2.1Country
    11198358*South Korea
    Not available196057*Japan
    Not available 197058*Germany
    Not available197266*UK
    Not available197267*USA
    * = oldest estimate available is 1990.  Source: World Bank and ILO estimates.
    Even then India is relatively behind, So we pulled up the recent NFHS surveys , and
    As per NFHS 4&5 survey by Govt of India (12,13) in the employment status of women data grid, one can closely evaluate the marginal decline in female employment in the age band 15-24 yrs, whereas for women above 30 yrs age the rate has seen a small positive improvement.
    So if it is younger women who are in fact declining from the workforce, where are they going instead? One answer that is proposed is that with the continued growth of India- women in the 15-24 age group are spending more time in education, going to college instead of directly entering the workforce. When we compared tertiary education enrollment for women across developed and developing economies, we found that there has been a dramatic increase in the proportion of women who are enrolled in colleges for higher education - with an 8 fold increase since 1990. 
    Country Tertiary School Enrollment female Gross %  ~1990Tertiary School Enrollment female Gross % ~2020
    India 4  - 199033-2021
    China 2 - 199469-2021
    Bangladesh1- 199023-2021
    United States80- 1990103-2020
    South Korea23- 199093-2020
    United Kingdom 26- 199080 - 2020
    Malaysia 22-199848-2020
    Thailand 20- 199351-2021
    Germany 30-199275-2020
    Japan 23- 199064-2019
    However, other countries saw similar booms in educational enrollment when their fertility stabilized, but these improvements in education were also accompanied by rising labor force participation in most cases - in this case India is an unfortunate outlier with LFPR numbers closer to Yemen and Saudi Arabia than to south east asian countries like Thailand and Malaysia.
    Much is made of the ‘demographic-dividend’ that India is expected to reap due its reducing fertility rate and youthful population. Typically the term demographic dividend refers to the benefits to economic growth that accrue when a country’s dependency ratio improves. Dependency ratio is the ratio of dependents (children and retirees) to adults of working age. When there are less dependents per working adult, a country is able to make rapid progress economically.
    China’s dependency ratio bottomed out in the 2000s at 37 percent - the decade in which that country saw incredible economic growth - it has been increasing ever since.
    While the dependency ratio in India has fallen from a staggering 72% in 1990 to 48 percent in 2021, it is still significantly higher than China’s at 44.55 percent. However, unlike China’s dependency ratio which has started to rise as its population ages - India’s dependency ratio is still falling and expected to bottom out in the early 2030s - making the next 2 decades crucial for the country to become rich before it starts to age.
    A macro simulation project done by economists Neha Jain and Srinivas Goli found that demographic benefits due to controlling fertility rate would increase India’s GDP per capita by 43 percent in 2061, compared to the hypothetical counterfactual case where India’s fertility rate remained stuck at 2001 levels.
    However, despite the rosy predictions-  demographics is not destiny. These dependency ratio based models presume that a large fraction of working age adults are able to find employment in gainful economic activities. Due to women’s low participation in the labor force - the assumptions of the standard model may not apply, and India may miss out on its demographic dividend.
    Indian women contribute to only 18 percent of the GDP while constituting 48% of the population. Thus, simply bridging the gender gap in employment could raise India’s GDP by 30 percent.
    None of these studies account for the burden of household care work which typically falls on women. While women are contributing to the labour force indirectly by supporting dependents with free unpaid care work, they are not directly contributing to the GDP. In case of educated women - we may be losing out on their specialised skills and training. 
    During the Pandemic , the onus of unpaid care work unfairly fell on women, which didn’t just compromise their productivity but also discouraged it. The return of women to the workforce in a way which directly contributes to the GDP hasn’t been encouraging because they are still burdened with a lot of domestic work, a responsibility internalised due to gender biased views deeply held in Indian households. This may be one of the strongest reasons holding them back. 
    In a grim statistic, the NFHS-5 showed that only 57% of urban Indian women and 49% of rural women in the 15-49 age group had access to money that they could spend. Even amongst women who do work - the NFHS study also showed that 75% of working women in India are employed by their families, and that 15% of working women receive no compensation for their work. This trend is particularly high for states such as Rajasthan, Jammu and Kashmir, Arunachal Pradesh and Nagaland. In Nagaland only 50% of working women receive cash compensation for their work.
    As the country is slowly but steadily getting its fertility rate and sex ratio under control, and the education gap between boys and girls is rapidly diminishing - the female labor force participation puzzle is quickly becoming the country’s single biggest problem to solve, even as issues of gender equity no longer take center-stage in our national political discourse despite women making up half of the electorate.
    Despite the grim statistical prognostications, there are examples of success within our immediate neighbourhood - Bangladesh has managed to achieve significant levels of female labor force participation and financial inclusion with a social milieu that is very similar to our own - and theirs is a case that we must study deeply as a nation. It is not a coincidence that their GDP growth has exceeded India’s in recent years. Bangladesh has women represented at the very top in the form of PM Sheikh Hasina, and at the grassroots where women make a significant fraction of the workforce of the nation's influential textile industry.
    If we want to solve this puzzle, every level of society needs to start looking at it from its own lens - whether it be representation in the professional sector or political participation, creating enabling policies for women to enter public spaces - and to create employment opportunities that are able to account for women’s unique needs. At the level of individuals we must encourage the women in our lives to leverage their unique skills for the betterment of society as whole, and we must encourage our men to take on responsibilities in the household to help create the space for our women to bloom. 
    Indian women have shown that they can succeed at every avenue when given half a chance. Gita Gopinath was the chief economist of the IMF and recently became the Fund’s First Deputy Managing Director, Falguni Nayyar recently became India’s richest self made female billionaire helming a startup that largely focuses on women consumers. 
    Starting from humble backgrounds- Sania Mirza - the daughter of a TV Mechanic from UP - recently cleared the NDA examination to begin her journey to become India’s first female muslim fighter pilot.
    If India seeks to become a 5 trillion dollar economy in the near future, the reduction of its dependency ratio will help it reap its demographic dividend and contribute to the GDP growth and increase per capita income, but realising its full potential will only be possible when women become an integral part of the workforce. The wheels of development will only turn, if its womenfolk contribute directly to it - not only as consumers but actively participating as entrepreneurs, creators and leaders.
    —The author, Aishwarya Nir
    , is a female entrepreneur, who has founded and is actively involved in managing Global Beauty Secrets- a luxury beauty brand. She’s also a Director at Aishwarya Healthcare - a pharmaceutical company. The views expressed are personal.
    Read her previous articles here 
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