Until recently, India’s female labour force participation rate was in decline, dropping from 33% in 1972 to its lowest ever recorded level of 17% in 2017. Since then, there has been a heartening reversal, with the rate rising to 37% in 2022, 4.2 percentage points higher than the previous year.
According to the 2023 State of Working India report from Azim Premji University, younger and educated cohorts of women are entering the workforce, taking up higher-paid salaried employment and helping to close the gender pay gap.
There has also been a rapid rise in the number of businesses led by women, including start-ups and micro, small and medium enterprises (MSMEs). Udyam, India’s comprehensive MSME registration platform, reported a 68% rise in women-led MSMEs in the nine months to January 2024; women now own 21% of the country’s MSMEs.
The increase in entrepreneurship among Indian women is reflected in startups. From big enterprises founded by women, like Nykaa, Mamaearth, MyGlamm and Sugar, to small-scale businesses operating at a neighbourhood level, women entrepreneurs are on the rise.
According to the Women in India’s Startup Ecosystem report from McKinsey, Krea University, Udaiti Foundation and ACT Grants, 18% of startups are led by women. By comparison, the proportion of women-led businesses in corporate India is at 5%.
Pushing female entrepreneurship could create 150 million new jobs in India by 2030
Smartphone driver
Tech – in particular high-speed internet and social media platforms such as Instagram and Facebook – has been a boon for women setting up micro businesses. According to Instagram’s owner Meta, 73% of Instagram business accounts set up in India over the past three years have been for women-owned businesses. Whereas brick-and-mortar ventures require large investments, small businesses can be started from home at minimal cost. Such ventures may start off small but they empower women and connect them to a large customer base that transcends local confines.
India’s unique identity scheme (Aadhaar), financial inclusion measures and digital payments networks (such as UPI) have further empowered women economically. Edelweiss, an Indian financial services conglomerate, mapped 3,300 women entrepreneurs across 13 Indian states in a 2021 study and found that just under half had BPL (below poverty line) cards but were able to accept digital payments owing to the government’s financial inclusion schemes.
Generating jobs
Increasing women’s participation in the entrepreneurial space can have substantial positive spinoffs on the economy. Such enterprises have been seen to prioritise sustainable business and contribute towards inclusiveness and equity. Women-led MSMEs also generate a considerable amount of employment. According to a 2021 report by NITI Aayog, the government’s public policy thinktank, by accelerating female entrepreneurship, the country could push the number of women-owned MSMEs from the current 13 million to over 30 million by 2030, potentially creating between 150 and 170 million new jobs.
Women-owned MSMEs also hire more women than male-owned MSMEs – 11% more according to Kinara Capital’s MSME Insights report – further boosting women’s labour force participation.
With India on a trajectory to become a developed country by 2047, women could have a significant role to play in realising the country’s ambition. A McKinsey study calculated that by integrating 68 million more women into the workforce by 2025 India could give its US$3.7 trillion GDP a US$700bn boost, taking the country considerably closer to its US$5 trillion GDP target for 2027.
While there has been an uptick in women-led enterprises, there are challenges specific to these businesses. These include lack of technical skills to fully leverage digital tools, difficulty in accessing finance, a shortage of childcare options and other support systems, and gender biases. It is important to address these challenges through establishing mentorship programmes, enabling greater access to funding, and fostering a more supportive ecosystem for women.
And with half of all women-led enterprises in the country being run by disadvantaged women, policies that nurture the entrepreneurial ecosystem and offer these women the right incentives in the form of soft loans and skills training will not just correct gender inequities but also help their businesses grow – and the Indian economy along with them.
