India is the world’s fastest-growing economy but struggles with a significant gender gap in the labour market | Photo Credit: DEEPAK KR

On Friday, the Nari Shakti Vandan Adhiniyam was defeated in Parliament. It was a missed opportunity to implement 33 per cent reservations for women in the Lok Sabha and State Legislatures. Can more women in Parliament fundamentally alter the economic landscape for working women? Evidence from the grassroots suggests this is possible.

India stands at a paradoxical crossroads. It is the world’s fastest-growing economy but struggles with a significant gender gap in the labour market. The female force labour participation rate (FLFPR) has risen from 23 per cent in 2018 to 40 per cent in 2025, yet this is only half the male LFPR (79 per cent, PLFS 2025). India’s FLFPR remains a global outlier, trailing behind countries like China (59.1 per cent), Bangladesh (38.6 per cent), and the global average of around 50 per cent (World Bank).

The World Bank estimates that closing the FLFPR gap to 50 per cent would raise GDP growth by one percentage point annually. On India’s current nominal GDP estimate of about $4 trillion (IMF), that is $40 billion per year in added value. This is nearly double the total outlay for all Production-Linked Incentive (PLI) schemes and over 4.5 times the Semicon India budget.

Political representation

At first glance, legislative quotas may appear distant from labour market outcomes. But evidence suggests otherwise. The 73rd Constitutional Amendment (1992) mandated 33 per cent reservation for women in Gram Panchayats, later raised to 50 per cent by many States. Beyond social equity, this had long-term economic impacts. Female leaders invested more in infrastructure aligned with women’s needs, example, drinking water and roads, shifting public goods expenditure to improve women’s daily lives (Chattopadhyay and Duflo, 2004), improved quality of service delivery (Bhalotra and Clots-Figueras, 2014), thereby breaking gender stereotypes and deep-rooted social norms.

Further, in villages with female leaders, women were significantly more likely to participate in the National Rural Employment Guarantee Scheme (NREGS). Female leadership improved the programme implementation quality and reduced need for bribes (Deininger, Nagarajan and Singh, 2020). Reservation does not just change policy, it changes aspirations. When women hold power, factors that reduce women’s time burden get prioritised.

Exposure to female politicians during young adulthood (ages 18-20) increases the probability of women working in wage employment by 42 per cent (Labor Economics, 2020). This happens first by policy: female leaders prioritise investments in health, education, and sanitation; foundational elements that enable women to seek work outside home. Second, and perhaps more powerfully, role modelling: simply seeing a woman in a position of authority alters social norms and raises aspirations for young girls. It signals that the labour market is a legitimate and achievable space for them.

Despite this progress, a brutal disconnect persists. Over 60 per cent of women-owned MSMEs report difficulty in accessing financial services; citing limited collateral, complex documentation, and slow processing. Women-led ventures face delays of up to six months in loan disbursement, affecting business continuity and growth. The annual credit demand-supply gap stands at nearly ₹1.37 trillion, indicating a pressing need for gender-sensitive financial reforms (Pahle India Foundation, 2025).

A woman legislator is more likely to push for “gender-budgeting” in State industrial policies, ensuring that credit flows to the grassroots. Successful models exist, initiatives in Bihar, Uttarakhand and Uttar Pradesh such as the Lakhpati Didi scheme and JEEViKA, have already enabled over 75,000 SHG-led micro-enterprises to access over $66 million in formal credit by tailoring products to women’s needs (MicroSave Consulting, 202).

India’s demographic dividend is at risk of becoming a demographic drag if half its population remains underutilised. The presence of more women in Parliament could translate into easier credit access for a woman in a village, a safe hostel for a migrant worker in a city, and a dignified wage for a young woman entering a factory. The Nari Shakti Vandan Adhiniyam offers a rare policy lever that works through multiple channels: norms, institutions, and public spending. We hope the Bill sees the light of the day in the not-too-distant future.

The writer is Executive Director, Pahle India Foundation. With inputs from Kuntala Karkun, Senior Visiting Fellow, Pahle India Foundation

Published on April 18, 2026