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Women's contribution to India's GDP is only 17%, less than half of the global average.
A new study highlights how promoting female entrepreneurship can greatly improve women's participation in the workforce. By creating more opportunities for other women, women-led businesses can generate significant economic growth, he says.
Imagine a world where women, despite making up half the population, own less than a fifth of businesses.
This is the reality discovered by the World Bank in a survey of 138 countries from 2006 to 2018.
What’s even more intriguing is how women-owned businesses empower other women.
In male-owned businesses, only 23% of workers were women, but women-owned businesses employ many more women. And although only 6.5% of men-owned businesses have a woman at the helm, more than half of women-owned businesses are led by women.
In India, the situation is even more difficult. Women's labor force participation and entrepreneurship are low, with the total number of working women barely changing over the past 30 years.
But the situation is slightly better when it comes to entrepreneurship.
Women represent around 14% of entrepreneurs and own a significant share of micro, small and medium enterprises (MSMEs). Notably, they contribute to industrial production and employ a significant portion of the workforce, according to the State of India Livelihoods Report 2023.
Most MSMEs in India are microenterprises, and many women-owned businesses are sole proprietorships, according to Niti Aayog, a government think tank. While some women-owned businesses employ large numbers of workers, the vast majority operate with very few workers.
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A report suggests that India can achieve 8% growth by having women make up more than half of the new workforce.
Indian women are therefore not really under-represented in entrepreneurship, but they run much smaller businesses than men – particularly in the informal sector.
Not surprisingly, women's contribution to India's GDP is only 17%, less than half of the global average. And India ranks 57th out of 65 countries for female entrepreneurship, according to the 2021 Global Entrepreneurship Monitor report.
A new paper by Gaurav Chiplunkar (University of Virginia) and Pinelopi Goldberg (Yale University) argues that promoting female entrepreneurship could significantly increase women's participation in the workforce, as businesses led by women often create more opportunities for other women.
The authors developed a framework to measure the barriers Indian women face when entering the workforce and becoming entrepreneurs.
They found significant barriers to women's employment and higher costs for female entrepreneurs when expanding their businesses by hiring workers. Their simulations showed that removing barriers would boost women-owned businesses, increase women's labor force participation, and generate economic gains through higher wages and profits and more efficient women-owned businesses. replacing those owned by less productive men.
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There are barriers, including limited access to child care, that limit women's ability to work.
Policies that support female entrepreneurship are therefore crucial, say the authors. Policies that boost entrepreneurship and increase demand for labor – allowing more women to become entrepreneurs – can be more effective – and faster – than changing long-standing social norms, says Chiplunkar .
“History tells us that standards are sticky,” says Ashwini Deshpande of Ashoka University.
Women continue to carry out most of the household responsibilities: cooking, cleaning, laundry, childcare and care of the elderly. There are more barriers, including limited access to safe and effective transportation and childcare, which limits their ability to work remotely. Even women's limited ability to travel independently is a key factor limiting their participation in the workforce, as shown in a recent study led by Rolly Kapoor of the University of California.
Despite a recent rise in female labor force participation in India, the picture is not as promising as it seems, as Ms. Deshpande notes in an article.
This increase, she found, reflects an increase in the number of women in self-employment, a combination of paid work and disguised unemployment, a situation in which more people are employed than are actually needed for a task. , which leads to low productivity.
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There has been an increase in the number of women working for themselves
“There is an urgent need to increase women's participation in regular paid work, with employment contracts and social security benefits. This would be the most important step, but not the only one, towards women's economic empowerment,” says Deshpande.
This isn't going to be easy. On the one hand, many women face barriers – from family and community – to work, whether or not they want to become entrepreneurs. And if more women join the workforce but there aren't enough jobs — because barriers to starting businesses remain — wages could actually fall.
Research shows that in India, women work when opportunities present themselves, indicating that the decline in labor force participation is the result of insufficient jobs and reduced demand for labor. feminine work. A recent Barclays Research report states that India can achieve 8% GDP growth by ensuring that women make up more than half of the new workforce by 2030.
Stimulating female entrepreneurship could be a solution.
