India's gender challenge

India is ranked very low on most global indicators of gender equality. Indian women do not feel safe on the streets, within the family, or at work. Their position has only worsened, as women are less likely to find jobs, and when they do, they earn a lot less than their male counterparts. Gender disparities impact not only working women, but also society at large. Although India is the fastest growing economy in the world, it has underperformed on growth, and the sustainability of growth is being threatened by many factors, including gender disparity. It is estimated that India could boost its economic growth to double digits if it could tap into 50 per cent of its unused demographic dividend. India’s economic growth depends upon successfully utilising both its female and male workforce. Increasing women’s participation in decision-making is enshrined by equality of rights and freedoms in the Preamble and Constitution of India.

Economically and politically, gender equality should be a no-brainer for policymakers. There is a direct link between gender equality and growth. India’s experience with women political reservation at Panchayat levels has shown that having women in leadership positions is hugely beneficial. The 73rd and 74th amendments to the Constitution in 1993 made it mandatory to earmark and reserve 33 per cent of all positions in the Panchayati Raj Institutions for women; this threshold was later raised to 50 per cent in many states. There are proposals in the pipeline on political reservation for women at the national level in Parliament.

The implementation of women’s political reservation in the local government affected many aspects of women’s economic and social lives. Women leaders focused on issues pertinent to women, and this significantly increased investments in drinking water, and other priority public goods for women. It encouraged many more women to come forward and report crimes. It improved perceptions of women by men, and increased aspirations for younger women. Hard evidence shows that these effects persist. This is among the most powerful evidence assembled on how women political reservation has huge benefits.

Women’s political reservation has huge knock-on economic effects, and it promotes women-led entrepreneurship and development (see Ghani, Ejaz & Kerr, William R & O’Connell, Stephen D, 2013. Political Reservations and Women’s Entrepreneurship in India, Policy Research Working Paper Series 6307, The World Bank). A detailed examination of enterprises in 600 districts in India shows that there is a strong connection between the implementation of political reservations in local government, and the rise of small-scale entrepreneurship among women.

Women’s political reservation increased the establishment of new women-owned enterprises, and associated employment and jobs by 40 per cent. The female ownership share of Indian manufacturing business more than doubled. The increase in women’s entrepreneurship was observed in both the unorganised and organised sectors, but a lot more in the informal sector.

Women-led development

Which industries attracted female entrepreneurs after political reservation for women? Within the manufacturing sector, female shares are highest in traditional industries. In services, female ownership rates in major cities tend to be higher in industries related to sanitation and education.

What were the channels through which women entrepreneurship flourished? The heightened start of women-owned establishments is concentrated in industrial sectors in which women have traditionally owned establishments. Equally as important, the greater entrepreneurship is mostly concentrated in household-based enterprises, rather than establishments opening as independent facilities.

Increase in women entrepreneurship is not linked to greater access to government-sponsored contracts and business. Likewise, improved financing conditions appear to play a modest role, as the increase in female-owned loan-holding establishments is weaker than the total effect registered and suggests that financing accompanied the increased entry rather than caused it.

Two factors increased women-led entrepreneurship and development — the provision of local infrastructure and inspiration for women entrepreneurs. Women leadership positions influenced the allocation of local resources, and greater provision of funds towards infrastructure and public goods favoured by women. This heightened provision of infrastructure and public goods specific to women lowered the cost of entrepreneurship for women, resulting in higher entry rates.

A second explanation is that political reservations inspired women to start their own businesses. Female leadership reservations in local areas increased the desire of women for stronger careers. A strong factor favouring this channel is those who would not have otherwise entered without the inspiration are likely to be those starting smaller firms than those who would enter regardless. Women leaders also affected by their institutional environment, as women leaders are less likely to take bribes than their male counterparts. 

Crony capitalism, and direct access to government business due to female political leaders did not play any role. This is not surprising, given the fact that government interacts more frequently with larger businesses. Women political reservation stimulated small-scale entrepreneurship, and this had a broader foundation than connections with government contracts, and that many of the very small establishments created did not rely on loans for launching their businesses.

Policy

Although achieving economic equality and shared prosperity sometimes requires tough choices (e.g. progressive taxation that may discourage effort), the opposite is true here. India’s experience has shown that there is a clear link between women’s political reservation and women-led development, especially in small-scale entrepreneurship and household establishments. This linkage is important given that many long-term gains and entrenchment of the empowerment benefits from political reservations can be aided by better economic opportunities that grow in parallel with a political voice.

The infrastructure correlation is the most policy relevant. Inadequate infrastructure affects women more than men, perhaps because women often bear a larger share of the time and responsibility for household activities. Travel in India can be limited and unpredictable, and women face greater constraints to geographic mobility imposed by safety concerns and/or social norms. Networking and agglomeration metrics suggest that female connections in labour markets and input-output markets contribute to a higher entry share.

Despite India’s many economic advancements since liberalisation began, the role of women in the Indian economy still lags well behind many African countries. Empowering half of the potential workforce has significant economic benefits beyond promoting gender equality. As a latecomer to gender equality and women-led development, India can leapfrog, with the implementation of  women’s political reservation at the national level.

The writer is lead economist, World Bank