Outdated job rules on women could slow India’s growth as it ages

Mumbai: India must increase women’s labour force participation to sustain high growth over the next decade as labour availability could become a key constraint, according to a report by Axis Bank.
According to the report `The Missing Half, India is likely to age much faster before it becomes wealthy because of a sharp decline in fertility rates. This demographic shift makes greater participation of women in the workforce an economic necessity if the country is to sustain strong growth and meet its macroeconomic goals.
Historically, women’s workforce participation initially dips when income rises in poor countries as women are not forced to work but after dipping it again begins to rise as women seek fulfilment in career. India is currently at the bottom of this U shaped curve.
Removing outdated restrictions on women’s employment should be the first step, said Neelkanth Mishra, chief economist, Axis Bank. “What we need to do first is remove the barriers that simply should not exist anymore,” he said. “Many of these are artificial restrictions on women’s work.”
Mishra said several rules still limit the sectors where women can work. “For instance, rules that prevent women from handling so-called hazardous substances or working in industries such as alcohol, chemicals, or certain types of manufacturing,” he said. “These restrictions may have been created with some intent in the past, but today they have clearly outlived whatever purpose they might once have served.”
According to Mishra, the regulatory framework has also become layered with additional restrictions that narrow opportunities for women. He said some rules prevent migrant women or women working on contract from taking certain jobs. “It is difficult to understand when or why many of these rules were introduced,” he said. “But it is evident that they now act as unnecessary constraints.”
He also pointed to restrictions that existed in service industries until recently. “In fact, until very recently, women in many service-sector roles were not allowed to work night shifts,” he said. “Imagine wanting to run a modern retail store, a salon, or a restaurant, and being unable to employ women after early evening hours.”
Mishra also cautioned against policy measures that rely on small incentives rather than structural reform. “There are also policy approaches that sound appealing but are not particularly effective,” he said. He cited schemes that offer fiscal incentives for registering assets in a woman’s name. “For example, programs that offer discounts or small incentives tied to putting assets in a woman’s name,” he said. “The argument is that if something is registered under a woman’s name, she will gain greater authority within the household.”
Mishra said policy should instead focus on removing barriers and allowing market forces to create opportunities. “In my view, the most powerful interventions are those that rely on market forces and focus on removing barriers rather than creating artificial incentives,” he said. “When you eliminate restrictions and allow markets to function freely, opportunities open up naturally.” He added that such an approach is both more efficient and more sustainable.
According to the report, India faces a narrowing window for rapid growth as its demographic transition accelerates. Within a decade, the pace of labour force expansion is expected to slow sharply to 0.4%. To sustain real GDP growth of 7%, India will need to increase worker participation in paid work from the current 47% to 60%.