A quiet revolution has been sweeping the Indian political landscape. Last year, the reservation (quota) for women in panchayats — rural local self-government — was increased to at least 50 percent, bringing women into the political fold in vast numbers.
However, economic empowerment may not have kept pace with political empowerment. When it comes to female labor force participation, gender disparities remain deeply entrenched. The 2012 World Economic Forum's Gender Gap Index ranked India 123rd out of 135 countries on economic participation and opportunity.
Female employment remains concentrated in industries related to sanitation, education, chemicals, and tobacco, while higher-value industries such as research and development, computers, and transport have the lowest rates of female participation. What explains these gender disparities? Is it poor infrastructure, limited education, and gender composition of the labor force and industries? Or is it deficiencies in social and business networks and a low share of incumbent female entrepreneurs?
In their recent Economic Premise report, Ghani, Kerr, and O’Connell explore the drivers behind female entrepreneurship in India. Basic demographic factors — population size, density, and literacy rates — certainly play a role. However, female ownership among existing businesses seems to be a stronger predictor of future female entry and entrepreneurship. There is strong evidence in favor of agglomeration and clustering effects, where higher female ownership of local businesses in related industries (similar labor needs, input-output markets) attracts new female entrants in greater numbers. Thus when it comes to addressing gap in women’s economic participation, promoting gender networks may just have the biggest bang for the buck.
Infrastructure is another low-hanging fruit for policymakers. The lack of basic amenities affects women more than men, as women are often responsible for a larger share of time-consuming household activities. Better electricity and access to water and sanitation may reduce the burden of women in providing essential household inputs for their families, and allow for more time to be directed toward entrepreneurial activities.
Travel in India can also be restrictive and unpredictable, and women face greater constraints in geographic mobility imposed by safety concerns and social norms. Investment in local transport infrastructure may thus directly alleviate a major constraint to female entrepreneurs in accessing markets.
Stringent labor regulations also stimulate female entrepreneurship. Several studies link labor regulations in Indian states to economic performance. These regulations may affect the gender balance of entrepreneurs by shifting activity into industries that female entrepreneurs tend to be more involved in, or influencing occupational decisions within the family.
As the 2012 World Development Report highlights, empowering half of the potential workforce has significant economic benefits beyond promoting gender equality. Building inclusive political institutions is important, but policymakers must expand economic voice alongside political voice. While achieving economic equality sometimes requires tough choices (such as progressive taxation), the opposite is true in the case of gender. Encouraging female entrepreneurship is a direct path to shared prosperity and a more dynamic, sustainable growth.