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India's female employment set to rise but may not be transformational

India’s low level of female participation is due to two major structural factors: more young women staying in education and a historic failure to implement labour market reforms and develop a strong manufacturing base.

August 16, 2022 / 02:23 PM IST
As the monsoon storms bear down on India, a dedicated group of women hope that after years of backbreaking labour, water shortages will no longer leave their village high and dry. (Image: AFP)

As the monsoon storms bear down on India, a dedicated group of women hope that after years of backbreaking labour, water shortages will no longer leave their village high and dry. (Image: AFP)

India’s female employment is set to rise over the coming years but may not be transformational, Capital Economics said in a note, after Prime Minister Narendra Modi focussed on women’s power in his Independence Day address.

“We agree with PM Modi’s assertion in his Independence Day speech over the weekend that boosting female participation in the labour force could have a major positive impact on the economy, but in truth the government’s record in this area is poor,” Shilan Shah, Senior India Economist said.

Increasing the female labour force participation rates is one way to boost the supply of labour and therefore potential gross domestic product. Female labour force participation refers to the share of the female working-age population that is employed or seeking employment.

Female participation is extremely low at just 21% in 2019 and it dropped further to 19% in 2020. The rate had risen to around 32% in 2005, Shah said.

India’s low level of female participation is due to two major structural factors: more young women staying in education and a historic failure to implement labour market reforms and develop a strong manufacturing base, the economist added.

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In its eight years in power, “the Modi government has made fairly slow progress on liberalising the labour market and easing land acquisition laws, which are key to unlocking the growth of the manufacturing sector,” Capital Economics said.

“The overarching issue is that implementing reforms in these areas is politically difficult. That is unlikely to stop being the case given the recent weakening of the BJP’s hand in the upper house of parliament,” it added.

The house expects structural reforms to be stop-start over the coming years, with contentious measures being pushed through as-and-when the political climate allows.

Therefore, a female labour force participation of 60 percent - 70 percent, comparable to the likes of Vietnam or Thailand, appears out of reach for India.

An ambitious, but realistic, aim could be to reach 30 percent - 40 percent in the next couple of decades, comparable with the likes of neighbouring Sri Lanka or Bangladesh, Capital Economics said.
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first published: Aug 16, 2022 01:49 pm
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