Population growth in developing countries was once viewed as a factor threatening their journey to economic prosperity. The total population was simply a divisor for the country's gross domestic product and therefore a drag. Their per capita GDP always kept them poor. China and India were among the countries exhorted to deal with this drag that was pulling down their economic growth.
The debate then shifted to the demographic dividend. The very countries that were once decried for their inability to arrest population growth, were now being hailed as the most well-positioned to reap this dividend because of the massive manpower advantage they had over economies that were facing dwindling manpower and moving towards an unviable dependence on technology and artificial intelligence.
After China successfully adopted the one-child policy and checked its population growth, India has now taken over the top spot as the world’s most populous country despite its own policies of population control through schemes promoting family planning and family welfare. The demographic dividend clearly is an alluring argument but the key to the population turning into an economic advantage is the opportunities that the economy affords and the employability of the people who enter the market every year.
According to the last official census of 2011, India’s total population was 1,210.1 million with 623.7 million males and 586.4 million females, or a ratio of 943 females per 1,000 males. In 2020, as per the Report of the United Nations, this rose to 717.10 million males and 662.90 million females, or a ratio of 108.18 males per 100 females.
Viewed against this demographic composition, what seems one of the most distinct and disturbing features of India’s workforce is the male predominance. For a country keen to harvest its demographic dividend, the low female participation is both a matter of concern and presents a vast potential. For a country aiming to achieve an 8% GDP growth for the next few years and become a major contributor to global growth, women must account for at least half the new workforce by 2030, by which time the absolute number of working-age persons would be about 1,104 million. Only then can India expect the share of its working-age population to total population to reach its highest level at 68.9% by 2030, as projected by EY India. This is also expected to bring down the dependency ratio to its lowest point at 31.2%.
Removing social barriers
India would remain the world’s largest provider of human resource, accounting for about 24.3% of the incremental global workforce over the next decade, EY estimates. However, this will require a major step up in its efforts to educate women, make congenial and progressive policies for their employment, diversify the job opportunities for women, and remove the social barriers that come in the way of greater female participation in the workforce. That would also require altering the conventional perspective that characterizes jobs as “male” or “female’ oriented, thereby erecting artificial barriers that rule out women for certain so-called male-oriented jobs.
As pointed out by the ADB Institute in its paper No. 2023-17 (December), “female labour force participation rate (FLPR) is an important metric for an economy as it leads to improved and sustained growth”.
According to McKinsey Global Institute’s recent report, The Power of Parity: Advancing Women’s Equality in Asia-Pacific, more than 70% of the potential GDP opportunity comes from increasing women’s participation in the labour force by 10 percentage points. Therefore, it is important that India leverage its large female population by encouraging them to join the labour force. Recent trends in India showed a decline in FLPR for the past few years, which has lately reversed. Although expected to grow further, the decline has historical precedence. It was 24.1% in 1955, increased to 33% in 1972, and fell to 23% in 2017.
It seems paradoxical that this has happened in spite of increased economic growth, declining fertility rates, and improved enrolment of women in higher education in the last few years. Both demand-side (work opportunities) and supply-side (availability of women for work) factors are responsible for this gender gap in India’s labour force.
The Periodic Labour Force Survey (2022-23) placed the FLPR at 37%, an increase of 4.2 percentage points from the last survey (2021-22). However, for this to reach the halfway mark, around 55 million of the roughly 108 million estimated addition to the labour force by 2030, would have to come from women.
Improving labour productivity
A recent Barclays report, India’s Breakout Moment, also highlights the need to improve labour productivity through upskilling to fully utilize its young generation, especially women. Traditionally, women in India have largely been employed in labour-intensive, low-paid, informal work without social security. This would also imply the need for faster growth of non-agricultural jobs to employ surplus labour and more formalization of employment. Apart from conventional sectors like healthcare, hospitality and tourism, sectors such as construction, wholesale, retail trade, manufacturing, real estate, professional, and financial services have the potential to generate opportunities for the expanding workforce in the coming years.
Besides employment generation, a focus on education and skills training in emerging technologies and capital-intensive sectors is required to improve labour productivity and help generate more formal-sector jobs. India's labour market can increase its share of GDP contribution by shifting away from agriculture and raising labour productivity. The Barclays report also calls for investment in hard infrastructure/ traditional industries to significantly improve labour productivity and raise the efficiency of both factors of production, capital, and labour. Sectors such as chemicals, transport equipment, metals, telecoms, and business services can generate more jobs and improve labour's share in income.
In an encouraging move, the director-general of civil aviation has recently advised airlines in India to increase the quota of women employees to at least 25% at various levels by 2025. It has also suggested that women employees be taken back if they have taken a break because of parenting needs or “attendant life-cycle issues”. Interestingly, considering the focus on science, technology, engineering, and mathematics (STEM) in the Indian education system, the Barclays report also points towards the scope to increase employability in the information technology (IT) sector and technical jobs as “India seeks to build capabilities in the manufacture of semiconductors, hydrocarbons, EV batteries, defence, and climate technology, among other industries”.
With nearly 49% of the total enrolment in higher education comprising female students, India should expect a much larger proportion of women’s participation in the workforce in the future. It has the largest pool of graduates with STEM background and English-speaking, giving India an advantage over its competitors. The annual increase to this pool is estimated at 2.14 million graduates, with India emerging as the global leader in STEM women graduates at 47.1%. India’s success in exporting IT and business process outsourcing (BPO) services is a fine example of leveraging demographic advantage.
Closing the gender gap
The Global Gender Gap Report 2024 presented by the World Economic Forum (WEF) has developed the Global Gender Gap Index which benchmarks the current state and evolution of gender parity across four key dimensions: economic participation and opportunity, educational attainment, health and survival, and political empowerment. The report states that big lifts in economic gender parity are needed to ensure that women have unfettered access to resources, opportunities, and decision-making positions. Governments are called on to expand and strengthen the framework conditions needed for business and civil society to work together in making gender parity an economic imperative.
With a ranking of 129, India has closed 64.1% of its gender gap in 2024. However, it ranks 142 in economic participation and opportunity, 112 in educational attainment, and 142 in health and survival. While India’s economic parity score has trended upwards for the past four years, it would need a further 6.2 percentage points to match its 2012 score of 46%. Bridging gender gaps in estimated earned income, labour-force participation rate, and professional and technical workers will make that objective possible.
Based on current data, the WEF report predicts that it will take 134 years for the world to reach full gender parity – roughly five generations beyond the 2030 Sustainable Development Goal (SDG) target. One can only hope that the exclusion of women from paid work in India as in the past will not perpetuate gender inequality in the economy and that women will lead India into the next level of economic growth in the not-so-distant future.
Ashok Lavasa is a former finance secretary of India and vice-president of private sector and public-private partnership at the Asian Development Bank.
