Looking closely at the conversation about India, many experts say the next decade is ours. Speaking to a reporter, Bob Sternfels, global managing partner at McKinsey & Company, said: “I strongly believe this could be not just India’s decade, but India’s century as well.” Investment banks like Morgan Stanley say India will experience exponential growth by 2027 and become the world’s third-largest economy. The gist of his argument is that India has an unprecedented opportunity. Many believe that with the country overtaking China to become the most populous country and international companies looking to move out of China to establish their manufacturing base, India is in the reins of great economic growth.
I agree that the next decade belongs to India, but it will rest on the shoulders of an equitable workforce. Without it, the unprecedented opportunity could quickly turn into an unprecedented opportunity cost.
By 2022, women will make up just 13% of the workforce, compared to 61% in China and 56% in the United States. This problem is not due to a lack of opportunities but to a lack of education, awareness and social support. According to a survey by the FSG, more than 85% of women of working age still need to complete university studies, and more than 50% still need to finish 10th grade. Additionally, 84% said they needed their family’s permission to start working, and once they found a job and left it for some reason, their chances of returning to the workforce decreased by 20%.
This inequality has resulted in low labor productivity in India. According to the Asian Development Bank (ADB), India’s labor productivity is $5.45 per person per hour. Mexico’s labor productivity is four times higher at $20.51 per hour per person. This has huge economic implications. Increasing women’s participation in the labor force directly impacts consumer spending. Women spend 42% of their salary on household expenses, including children’s education, while men spend 28%. Female workers are also believed to be more productive. In a study of sales professionals, salespeople achieved 86% of their sales quotas, while men only achieved 78%. By increasing women’s labor force participation to a different level than men, India is losing 27% of its GDP growth.
Information asymmetry is at the root of India’s unequal frontline workforce. Several products that followed the market model were released to solve this problem. The market model was invented to eliminate information asymmetry in the market and to achieve efficiency through the unrestricted flow of information. While this model has worked well in areas like personal finance and purchasing, market innovation has yet to resolve existing information asymmetries in the frontline workforce.
This was mainly for three reasons:
- When these market solutions were introduced, India needed infrastructure to support such models. Internet penetration was low, and the digital market model was beginning in India.
- Due to low internet penetration, the digital adoption rate among companies and workers was also low, resulting in fewer jobs and applicants entering the platform.
- These marketplaces operate independently from the workers of the ecosystem they operate in, which consequently requires applicants to be more efficient.
- Therefore, companies did not find these platforms useful, and workers were discouraged from using them as they needed to get the jobs they needed.
However, now that the smartphone penetration rate in India is over 70% and digital adoption is accelerating, markets may come back, but they must be rooted in the ecosystem in which working women operate. Therefore, Workforce Market 2.0 must follow a three-pronged approach to achieve fairness.
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