India’s water governance regime is crying for reforms

India’s water governance regime is crying for reforms
The International Water Day serves as an annual reminder of the mess in management of water resources
In an intriguing order on 20 March, the Uttarakhand High Court has recognized the rivers Ganges and Yamuna as a living entity, which means that anybody found polluting the river would be seen as harming a human being. It remains to be seen what impact the order has but the order does reflect a sense of urgency in trying to rescue one of India’s most important rivers from rampant pollution.

India’s water woes however do not end with the pathetic state of the Ganges. After two consecutive rainfall deficient years, 2016 saw normal monsoons in India. However, a look at reservoir levels shows that even a normal rainfall year is failing to sufficiently recharge our water bodies. Nowhere in the country are reservoir levels significantly more than half of their total capacity.

What is even more worrying is the long-term trend: there seems to have been a secular decline in reservoir levels. Data from the Centre for Monitoring Indian Economy shows that last 10 years’ average live storage as percentage of live capacity at full reservoir level has fluctuated between 25-33% in this decade. Between 2001-02 and 2004-05 this value was always more than 60%. This seems to be a result of increasing exploitation of ground water. The rate of withdrawal of groundwater as a percentage of net groundwater available per year—defined as level of ground water development—has seen a sharp increase between 2004 and 2011. While states such as Gujarat and Tamil Nadu registered some improvement, traditional farming states such as Punjab and Haryana have witnessed rising exploitation of groundwater resources.

The proportion of farmers dependent on ground-water irrigation has risen sharply over the past couple of decades, and lax regulation on water use, lopsided price incentives, and high energy subsidies to farmers have encouraged relentless exploitation of groundwater through borewells in order to water farmlands. As a two-part data journalism series published in Mint last year showed, the inefficient use of water in agriculture is the main source of inefficiency in India’s water governance regime. India’s farms consume more water to grow same amount of crops compared to global averages. What makes this even worse is the fact that despite being a water-scarce country, our agricultural exports are extremely water intensive .

While the farm sector is an obvious candidate for urgent water reforms, non-farm use of water also suffers from unplanned usage and waste. A majority of India’s households are dependent on ground water for their day to day water requirements. According to the 2011 census, less than half the households with access to water supply in their premises depend on treated tap-water. This means that a majority of India’s households are using private means (such as bore-wells) to extract groundwater without any regulation or concern for conservation. Unplanned urbanisation will only accentuate this problem. The fast depletion of ground-water resources will also increase the risks of contamination, as several experts have warned.

It is not these concerns have not been taken note of. A 2015 report of the Standing Committee on Water Resources noted the rapid depletion of groundwater resources in the key granaries of the country and the lack of up-to-date and comprehensive data on India’s water resources which is hindering effective water management.

In July 2016, a committee under the chairpersonship of Mihir Shah, an economist and a former Planning Commission member, submitted a report on restructuring the Central Water Commission and Central Ground Water Board which criticized India’s water governance framework for a complete lack of coordination and clarity. It argued that official estimates suggesting adequacy of water resources in India seem dodgy when compared with independent studies which are based on internationally comparable evapotranspiration rates (sum of water lost to atmosphere due to evaporation and transpiration via plants). The report also criticized India’s existing water-governance system as silo-based which views ground water, river basin rejuvenation and other such challenges as isolated tasks. Even these tasks are being ill-managed thanks to a human resource crunch in key bodies such as the Central Ground Water Board, the report pointed out.

The sorry state of water governance in India is a result of both state and market failure. Every rice farmer in Punjab, who is over-exploiting ground water to grow rice (with guaranteed procurement by the Food Corporation of India) is undermining a public good to maximise his private gain as he does not have to pay the cost for doing so (the society at large bears the cost). The state failure lies not just in instituting the wrong incentives but also in mismanagement of water systems. The Shah Committee report has highlighted how the huge amount of water collected in government reservoirs is not available to farmers for use in various parts of the country. Unless the mismanagement of water resources is addressed and disincentives put in place to prevent over-exploitation of water, India is likely to witness rising water-related crises and conflicts in the years to come.

Wastewater key to solving global water crisis: UN

Wastewater key to solving global water crisis: UN
On current trends, the UN Environment Programme forecasts that water demand—for industry, energy and an extra billion people—will increase 50% by 2030
Recycling the world’s wastewater, almost all of which goes untreated, would ease global water shortages while protecting the environment, the United Nations said in a major report Wednesday.

“Neglecting the opportunities arising from improved wastewater management is nothing less than unthinkable,” said Irina Bokova, director-general of UNESCO, one of several UN bodies behind the report issued on World Water Day.

For decades, people have been using fresh water faster than Nature can replace it, contributing in some regions to hunger, disease, conflict and migration. Two-thirds of humanity currently live in zones that experience water scarcity at least one month a year. Half of those people are in China and India.

Last year, the World Economic Forum’s annual survey of opinion leaders identified water crises as the top global risk over the next decade. On current trends, the UN Environment Programme forecasts that water demand—for industry, energy and an extra billion people—will increase 50% by 2030.

Global warming has already deepened droughts in many areas, and the planet will continue to heat up over the course of the century, even under optimistic scenarios.

“There is an absolute necessity to increase water security in order to overcome the challenges brought on by climate change and human influence,” said Benedito Braga, head of the World Water Council, an umbrella grouping of governments, associations and research bodies.

Wastewater—runoff from agriculture, industry and expanding cities, especially in developing nations—is a major part of the problem. That is especially true in poor countries where very little, if any, wastewater is treated or recycled.

High-income nations treat about 70% of the wastewater they generate, a figure that drops to 38% for upper middle-income countries. In low-income nations, only 8% of industrial and municipal wastewater undergoes treatment of any kind.

More than 800,000 people die every year because of contaminated drinking water, and not being able to properly wash their hands. Water-related diseases claim nearly 3.5 million lives annually in Africa, Asia and Latin America—more than the global death toll from AIDS and car crashes combined. Chemicals and nutrients from factories and farms create deadzones in rivers, lakes and coastal waters, and seep into aquifers.

The 200-page World Water Development Report details a four-pronged strategy for transforming wastewater from a problem to a solution, said lead author Richard Connor of UNESCO’s World Water Assessment Programme. Besides reducing pollution at the source, policy initiatives must shift focus to removing contaminants from wastewater flows, reusing water, and recovering useful by-products, the report concludes.

“Up to now, decision makers have mainly focused on supplying clean water rather than managing it after it has been used,” Connor told journalists. “The two aspects are inextricably linked.”

Water can be used over and over, he added, pointing to the fact that water from several major rivers in the United States is recycled up to 20 times before reaching the ocean. The potential for reusing liquid waste is perhaps best illustrated by astronauts on the International Space Station who drink recycled urine and use it to wash up.

On a larger scale, there are many nations where necessity has spawned innovative technologies. In Singapore and the southern California coastal city of San Diego, residents already drink recycled water.

In Jordan and Israel, 90% and 50% of agricultural water, respectively, has been recovered for reuse, according to the report. Besides being recycled, wastewater “can also be a rich source of nutrients, minerals and energy—all of which can be cost-effectively extracted,” said Guy Ryder, chair of UN-Water, and head of the International Labour Organization.

These are the same elements, he added, that cause terrible damage when untreated wastewater is released into the environment. Harvesting phosphorus, for example, from urine—supplied by urine-diverting toilets—reduces wastewater’s nutrient load. Already in use in Australia, China and Japan, these systems can be easily scaled up. More than a fifth of global phosphorus demand worldwide could be met by recycled human urine and feces, according to a recent study.

Waste can also be converted into fuel. A 2015 law in Japan requires sewage operators to use biosolids as a carbon-neutral form of energy. The city of Osaka produces 6,500 tonnes of fuel per year from 43,000 tonnes of wet sewage sludge for electricity generation.

The Uttarakhand high court on Monday declared the Ganga and Yamuna living entities

The Uttarakhand high court on Monday declared the Ganga and Yamuna living entities, bestowing on them same legal rights as a person, a move that could help in efforts to clean the pollution-choked rivers.

The order also ends the five-day reign of New Zealand’s Whanganui River as the only one in the world to be granted living entity status.

The court’s order will allow complaints to be filed in the name of the two rivers, held sacred by millions of Hindus. It also gives the Centre eight weeks to set up boards for cleaning and maintaining the rivers.

“It means now Ganga and Yamuna rivers will be treated like a natural person but only through a designated person,” advocate .

A bench of justice Rajeev Sharma and justice Alok Singh allowed the director general of Namami Gange project, Uttarakhand chief secretary and advocate general the right to represent the Ganga.

The Namami Gange is the Modi’s government’s ambitious plan that brings together various efforts for cleaning and conserving the river.

The world’s third largest river, the Ganga is the holiest Hindu river and also among the dirtiest in the world, with toxic industrial waste and untreated sewage reducing it to a dirty trickle at several places.

Reverentially referred to as Maa Ganga (Mother Ganga) for the water it provides to millions and fertile plains it feeds, the 2,500km river originates from Gangotri in Uttarakhand and criss-crosses several states before emptying into the Bay of Bengal.

The Yamuna is its largest tributary and originates from Yamunotri in Uttarakhand.

Hearing a petition for removing encroachments from the Shakti Canal on the Yamuna in Dehradun district, the high court asked the district magistrate to clear the areas in 72 hours or face legal action.

Centre moves bill for single tribunal on inter-state water disputes
MC Pant, who appeared for petitioner Md Salim, said any case or complaint filed could now be filed in the name of the rivers.

“I had earlier asked officials to remove encroachments. I will find out why it was not done and take action against concerned officials” Dehradun district magistrate Ravinath Raman told HT.

Earlier this month, the Centre cleared projects worth Rs 1,900 crore for Uttarakhand, Uttar Pradesh, Jharkhand, Bihar and Delhi under the Clean Ganga campaign.

Of the 20 projects, 13 are in Uttarakhand and will involve setting sewage treatment plants and upgrading the existing ones.

Rural development programmes: Implementation challenges and solutions

Rural development programmes: Implementation challenges and solutions
With a majority of the population living in rural areas in India, rural development is key to the development of the country. Based on his experience of working closely with the district administration in Purulia district in West Bengal, Pushkar Pahwa discusses the issues in the implementation of rural development programmes on the ground, and makes suggestions to improve their effectiveness.

In a predominantly rural country like India the importance of rural development in driving the nation’s development cannot be overemphasised. At present, there are a number of ambitious rural development programmes in place. In this article, I analyse the issues in the implementation of rural development programmes1, based on my experience of working closely with the district administration in Purulia district of West Bengal and with the beneficiaries of programmes at the grassroots level. I also make suggestions to ensure better implementation and results.

Credit linkage under NRLM: Forced or demand-based?
The National Rural Livelihood Mission (NRLM) is a poverty alleviation programme of the Ministry of Rural Development that aims to bring at least one woman from each poor, rural household into the self-help group (SHG) network, and enable them to access gainful self-employment and wage employment opportunities by providing them with microfinance. An important component of NRLM is bank linkage of women SHGs to ensure access to hassle-free loans and other banking products and services for livelihood activities, which they lack individually because of their poor economic status. However, the emphasis is merely on achieving the annual targets2 of the number of SHGs provided with cash credit by each bank branch in the district, and not on the effective usage of these loans. What is often ignored is the difference between ‘forced lending’ and ‘demand-based lending’. Due to a lack of micro planning, the loan money is often used for unproductive purposes rather than for undertaking a remunerative semi-skilled/skilled activity. The focus on achieving the annual target in the last quarter of the financial year further contributes to the ‘forced’ nature of the credit linkage.

As a result many SHGs fail to make timely repayments. This is a lose-lose situation as on the one hand, it leads to an increase in Non-Performing Assets (NPA) of the banks, which in turn makes them reluctant to further lend to this segment; on the other hand, the SHGs become debt-ridden due to unwise use of loans.

Skill training under NRLM: End in itself?
To fulfil the livelihood training objective of NRLM, many trainings for skill development are organised by the district administration to enable SHGs to undertake skilled and high-income activities such as tailoring, incense stick making, gardening, running canteens etc. With a sound business proposal it becomes easier for them to ‘cajole’ bank managers to approve their loan proposals.

However it is a sad fact that instead of being a means to enhanced income and improve livelihood, the trainings merely become an end in themselves with neither side taking the learnings forward to ensure that the trainings result in successful livelihood projects.

MNREGA: Guidelines vs. practice
Huge gaps exist in the implementation of programmes vis-à-vis their guidelines. For instance, the Intensive Participatory Planning Exercise (IPPE) guidelines for preparing labour budgets3 under MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) mandate that the block planning teams responsible for conducting household surveys should have a female member who would be the representative of upa sangha (women SHGs representative body at the gram sansad4 level) to ensure convergence between MNREGA and IPPE. However, the actual composition of planning teams is not uniform across blocks and in many cases female representatives are missing. This leads to the question of how participatory, in reality, the IPPE has been?

Lack of wider community participation in preparing social and resource maps5 as a part of the IPPE exercise, as mandated by the guidelines, again lead to the exclusion of demands of the most vulnerable.

Human resource crisis: Cliché or reality?
Often human resource shortage is cited as the reason behind poor development in remote and conflict-affected areas. While it is true to an extent that the district administration in difficult areas is constrained by the lack of manpower, what is of concern is how efficiently the existing human resources are utilised.

In this context, I would like to mention the ambitious fellowship programme of the Ministry of Rural Development called Prime Minister’s Rural Development Fellowship (PMRDF). The PMRDFs are highly qualified and self-motivated young professionals appointed for a period of 2-3 years to work as development catalysts with district administrations in the most backward districts in the country. The fellows are completely at the disposal of the district magistrate who can involve them in any works related to rural development.

With manpower crunch, it is expected that the PMRDFs would be ‘utilised’ well by the district magistrates in planning, execution and monitoring of various works in the district. However in reality, there is a huge disparity in the way the PMRDFs are being treated by the district administration and how they function. While in some districts that are led by motivated and proactive district magistrates, the PMRDFs have made significant contributions to the district administration, in many other districts, they are not being utilised as per their calibre and have ended up as glorified clerks preparing note sheets.

Another area of concern in this context is the quality of training imparted to the cadre of workers appointed to work at the grassroots level. For example, in Purulia district of West Bengal, there has been a lot of recruitment of ground staff under NRLM in the past year. These include community service providers (CSP), sangha coordinators6 (SC) and district-level trainers (DLT), who are the key players in ensuring the success of the programme. However due to lack of effective training programmes for the staff and no objective performance appraisal format, they are hardly able to make significant value addition. Also, many a times even the efficient and motivated personnel are removed due to personal vendetta or political considerations leading to failure of the programme. For example, a pilot project of the West Bengal government called Muktidhara, which aimed at improving livelihoods, suffered badly in Purulia district when the employment contract of the district project manager was not renewed despite the existing manpower crunch - leaving the project leaderless.

Another aspect is the lack of awareness of the district administration of the presence of a cadre of motivated community personnel who have been well-trained in best practices by non-governmental organisations (NGOs). In Purulia district, there exist a large number of Mahila kisans (MKs)7 who have been trained by the NGO Lok Kalyan Parishad (LKP) under the Mahila Kisan Sashaktikaran Pariyojana (MKSP)8 in modern agricultural practices and organic farming. There is also a cadre of female farmers trained in dryland agricultural practices by NGO PRADAN. However, the presence of both of these is limited to the areas where NGOs are working in partnership with the district administration and no efforts have been made to replicate their success in other areas by conducting trainings with the already trained MKs as master trainers.

Therefore, ensuring more efficient utilisation of the talent available with the district administrations would contribute immensely to better implementation of development projects.

Way forward
From ‘punishment’ posting to prized posting
A common thread in the issues outlined above is the lack of an efficient leader. With most government officers considering posting in backward areas as punishment postings, the attitude is that there is nothing more to lose by not performing. So ironically, while we should be having the best and highly motivated officers to accelerate the process of development in hitherto underdeveloped areas, what we actually have is a cadre of uninterested officers waiting for their punishment postings to get over. Thus, what is needed is to transform these so called punishment postings to prized postings, which attract the best of talent to such areas. This can be done by offering additional perks like hardship allowances or by assuring more sought after postings after the officers have served well in such areas for a minimum period.

Unburden the district magistrate
The office of the district magistrate in most of the backward districts combines within itself the functions of revenue, development and law and order, which overburdens the district magistrate, leaving little time for development administration. Thus, the district magistrate tends to only focus on developmental issues that he/she considers more important and the whole direction of development is steered as per his/her priorities. It is high time that the principle of division of work is adhered to and the district magistrate unburdened by appointing a separate district-level officer as the executive head of the Panchayati Raj body for overseeing development administration in the district.

Strengthen feedback mechanism
The officers at the district level often feel that their only role with respect to the policies of the central government is implementing them as per the guidelines. While there are huge lacunas even in putting theory into practice, a crucial link that is missing in policy formulation is the feedback on existing policies which should come from the officers in charge at the lowest tier of development administration, that is, either the block development officer or a district-level officer in charge of development administration. An efficient institutionalised feedback channel should be established so that the challenges faced are brainstormed by those involved in policy formulation and implementation, and the learnings can be incorporated in the policies to make them more effective. The absence of institutionalised feedback mechanism will only lead to ineffective policies getting implemented in an inefficient manner.

Job creation is vital for a new India

Job creation is vital for a new India
An inclusive India would be one where good jobs are available to all people everywhere, including Dalit men and women in the backwaters of India’s heartlands
Prime Minister Narendra Modi declared his vision for a “New India” in his victory speech after sweeping the Uttar Pradesh elections. “The poor want a leg-up, not a handout,” he said. A few days earlier, a national newspaper summarized what its journalists had gathered from citizens at election rallies. It reported this on its front page in the plea of a Dalit woman. “Give my husband a job: I don’t want LPG,” she said.

Jobs and livelihoods are what people want. Considering the huge population of the young that India has—the largest in the world—India should also be generating more jobs than other countries. But the Indian economy is a laggard in job creation despite good GDP (gross domestic product) growth. India’s rate of job creation is only two-thirds of the global average. Moreover, the employment elasticity of the Indian economy—the numbers of jobs it creates with economic growth—has been declining in the last few years. Modi must pull the aeroplane out of a nose-dive to lead the country to a vision of an inclusive India, where good jobs are available to all people everywhere, including Dalit men and women in the backwaters of India’s heartland.

Two recent reports, both produced jointly by the Confederation of Indian Industry and Boston Consulting Group, have analysed the reasons for low job creation and suggested how more jobs can be generated. One, “India: Growth And Jobs In The New Globalization”, looks at global forces that are creating unemployment and increasing inequality around the world. “Capitalization” of production systems, with increasing automation, is reducing jobs for workers, and producing more wealth for owners of capital than for workers in production systems. “Financializing” of economies, with even more money being made from purely financial assets, has turbo-charged the increase in inequalities in incomes and wealth around the world. The report also points out that “Industry 4.0” automation technologies, more flexible, and less dependent on labour, are enabling production systems to be localized within developed countries’ markets. Combined with the pressure on governments everywhere to generate more jobs within their own countries, production systems are likely to become more local and less globally interconnected than they have been in the past 20 years.

Each country must develop its own job-creation strategies with the participation of domestic stakeholders because, while technology is universal across countries, social and economic conditions vary. The other report, “Future Of Jobs In India, Enterprises And Livelihoods”, is focused on India, and was prepared with the participation of over 170 diverse organizations and persons. It takes a broad systems’ view of the process of job creation, including societal forces that will make technology adapt to societal needs. Both reports recommend strategies for: (1) strengthening clusters and networks of small enterprises which can create more widespread employment and with less capital investment than large factories; (2) developing life-long learning systems that will enable people to learn new skills “just-in-time” when the content of their work changes, which it will often in future when new technologies are applied and new industries emerge; (3) re-framing labour law reform from a paradigm of more flexibility to “hire and fire” to a paradigm of better social security systems, without which societies will not allow employers more freedom to shape contracts with those who work in their enterprises (which Uber, for example, is discovering in many countries); and (4) providing easier access to finance for micro-enterprises. Both reports also highlight the Brahma face of technology as a creator of jobs, while recognizing its Shiva face of a destroyer of jobs at the same time.

A youthful country of 1.2 billion people, with the largest number of employment seekers in the world, must create more jobs in many sectors. It must pursue more growth in manufacturing and build infrastructure. It must vigorously pursue other avenues too. India has a large growth opportunity in natural produce sectors—food, fruits, vegetables, dairy, poultry and fish. Rural and urban economies support each other through natural produce supply chains. Natural produce enterprises can generate jobs around the country. India has enormous and diverse assets of natural beauty, heritage and culture, spread across all its states. Therefore, another sector where India has huge, insufficiently tapped potential for widespread generation of livelihoods is tourism and hospitality. Some other sectors with large potential for more enterprises and sources of livelihoods around the country are healthcare, renewable energy, water and sanitation.

A vision of a “new India”, with widespread opportunities for “a leg-up” for all, requires a coordinated, “whole of government” approach to policy reforms which are explained in the second report. It highlights that job creation must become an overarching goal for government along with economic growth, which it has not been so far. Plans at all levels of government—at the Centre, in the states, and in cities—must be directed towards creating ecosystems that generate better livelihoods and jobs, and progress must be measured accordingly. Finally, since jobs emerge from a healthy jobs ecosystem and cannot be sprinkled into the economy from above, many stakeholder groups must participate in systematic processes at the Central, state and city levels for finding and implementing solutions together.

Moving towards a larger formal economy

Moving towards a larger formal economy
One-time initiatives like currency swap might signal intent, but increasing the size of India’s formal economy will require a sustained effort
According to conventional wisdom, the currency swap initiative was supposed to have been the Narendra Modi government’s political epitaph. The assembly poll results have turned that on its head. The economic effects of the initiative will likely continue to be debated for a while yet. But the voting public has shown that at worst, it didn’t consider any immediate economic pain arising from currency swap sufficient reason to vote against the Bharatiya Janata Party—and at best, the initiative was an electoral positive, seen by voters as proof that the Prime Minister intends to follow through with difficult reforms. This creates a unique opportunity for Modi.

As NITI Aayog chairman Arvind Panagariya put it, the initiative was seen as a “move towards formal economy” with the need “to bring workers and activity into the formal sector”. This is an economic and social imperative. Providing employment for India’s youth bulge is the state’s greatest challenge, and will remain so for the next few decades. Unorganized sector jobs are a suboptimal solution, much less productive than formal jobs; apparel firms in the latter are 15 times more productive than those in the former, as an example. There are numerous other concerns as well, from a lack of security for the worker to lopsided growth and inefficient capital allocation.

Economic logic dictates that as a country climbs the development ladder, its economy will shift towards the formal. However, this has not been the case with India. National Sample Survey Office (NSSO) statistics show that in the 1989 to 2010 period, informal firms have accounted for the maximum number of jobs created and the vast majority of new establishments. Little wonder that 80-91%—depending on the criteria used—of the non-agricultural workforce is in the unorganized sector.

Modi now has the political space to consider the policy measures needed to increase formalization of the economy; currency swap may have been pitched as a first step, but the changes that are truly needed are structural in nature. The common sense trio of labour—there are currently 200 labour laws on the books—land and tax reforms top that list. They are distortionary on multiple levels, from making it difficult for firms to expand to incentivizing them to stay small in order to avoid higher regulatory compliance costs. Tinkering around the edges will be of little use here. For instance, multiple studies have shown that raising the number of workers beyond which a firm must seek government permission for retrenchment merely changes the threshold at which inefficiency sets in.

But a granular look makes it clear that this is no silver bullet. As Ravi Kanbur points out in Informality: Causes, Consequences and Policy Responses, disaggregating NSSO and Annual Survey of Industries statistics throws up some interesting facts about the informal sector. Firms that should comply with the Factories Act, 1948, but do not do so—the institutionalised corruption that arises from evading regulation is another cost of regulatory cholesterol—and firms that adjust out of regulation make up a minority of the sector. The majority of the country’s informal sector, by far, is made up of enterprises whose natural size falls below the regulatory threshold.

Addressing this necessitates a much broader approach on multiple fronts. Improving transport infrastructure and connectivity is one of them. Spatial mismatches between enterprises and workers are a major barrier to growth and formalization: the relatively high cost of urban living makes labour-intensive firms uncompetitive in cities while poor connectivity undercuts hub and spoke arrangements that could get around the problem. Setting up enterprises in smaller towns with lower costs is another option—but here again, improved infrastructure is a necessity. Improving access to formal credit is another front.

The Modi government is laying the foundation via its banking inclusion drive, but this is a multi-faceted problem; it will require, for instance, overhauling property rights systems to better allow assets to be used as collateral. A third front—a crucial one—is improving the quality of human capital by boosting education and skill levels.

One-time initiatives like currency swap might signal intent, but increasing the size of India’s formal economy will take a sustained effort that works on the systems that underlie the Indian economy and society. The interlinked nature of these systems where improvement on one front will necessitate working on another—as access to credit and property rights show—makes it that much more difficult. So does the fact that in multiple areas such as labour and land reforms, state governments will have as much of a role to play as the centre. Here, given that the BJP now controls a large number of states, Modi must push their governments to take these reforms forward.

Modi has shown that he has the appetite—and the aptitude—for the necessary risk-taking. But the setbacks his government has faced in its quest to simplify labour regulations point to the magnitude of the challenge. Now, it remains to be seen just how far his appetite and aptitude extend.

Will Prime Minister Narendra Modi undertake the tough reforms needed to increase the size of India’s formal economy?

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Low, stagnating female labour-force participation in India

Low, stagnating female labour-force participation in India
India’s growth strategy has focused on domestic demand and high-value service exports, which generate too few employment opportunities for women
In recent decades, India has enjoyed economic and demographic conditions that ordinarily would lead to rising female labour-force participation rates. Economic growth has been high, averaging 6-7% in the 1990s and 2000s; fertility has fallen substantially; and female education has risen dramatically, albeit from a low level. In other regions, including Latin America and the Middle East and North Africa, similar trends have led to large increases in female participation. Yet National Sample Survey (NSS) data for India show that labour force participation rates of women aged 25-54 (including primary and subsidiary status) have stagnated at about 26-28% in urban areas, and fallen substantially from 57% to 44% in rural areas, between 1987 and 2011. Different age groups or different surveys essentially tell the same story, even though the levels differ slightly.

This is an important issue for India’s economic development as India is now in the phase of “demographic dividend”, where the share of working-age people is particularly high, which can propel per capita growth rates through labour force participation, savings, and investment effects. But if women largely stay out of the labour force, this effect will be much weaker and India could run up labour shortages in key sectors of the economy. Also, there is a wealth of evidence suggesting that employed women have greater bargaining power with positive repercussions on their own well-being and that of their families (see: Engendering Development Through Gender Equality in Rights, Resources, And Voice, World Bank).

A Feminization U hypothesis for female labour participation?

One possible explanation for this trend could be that India is behaving according to the feminization U hypothesis, where in the development process, female labour force participation first declines and then rises. The hypothesized mechanisms for the decline are a rising incompatibility of work and family duties as the workplace moves away from home, an income effect of the husband’s earnings, and a stigma against females working outside the home (generally, or in particular sectors). The rising portion then comes with a receding stigma, high potential earnings of females as their education improves further, as well as fertility decline, and better options to combine work and family duties.

I argue below that some of the mechanisms may be at work in India. Also, a strong U-shape in the relationship between education and female participation is visible in the data, with the turning point in urban areas having shifted recently from completed middle school to completed secondary education ( see: What Explains The Stagnation of Female Labor Force Participation in Urban India? by Stephan Klasen and Janneke Pieters). But the story is not that straightforward for at least four reasons. First, as shown by Isis Gaddis and Stephan Klasen (Economic Development, Structural Change, And Women’s Labor Force Participation: A Re-Examination Of The Feminization U Hypothesis), the empirical support for the feminization U hypothesis is feeble at best, pointing to a very shallow U if at all. Second, it also finds that the U hypothesis cannot explain the vastly different levels of female participation between countries. In India, female labour force participation rates are 22 percentage points below their expected level in a feminization U curve. Third, Rahul Lahoti and Hema Swaminathan ( See: Economic Growth And Female Labour Force Participation In India), who investigated the feminization U hypothesis for India using a state-level analysis, find little support for a U-shape of female participation in the Indian case. Lastly, while income effects, the separation of home and work, and stigma might explain declines in female participation, the rapid fertility decline is associated with the rising portion and should mitigate these trends.

Demand and supply-side drivers of female labour participation

A number of new micro-level studies using NSS data have appeared in the last few years, trying to shed light on this phenomenon, examining labour supply and labour demand factors.

Farzana Afridi and others (Why Are Fewer Married Women Joining The Work Force in India? A Decomposition Analysis Over Two Decades) focus on supply factors. After first showing that the decline in female participation in rural areas is concentrated among married women aged 25-64, they then show that from 1987-2011, rising own education, incomes, and husband’s education could account for most of the decline in female labour force participation in rural areas. They also argue that the decline might be driven by increasing returns to home production, relative to market production. This might be particularly relevant if the domestic production is childcare. While the educated women that drop out indeed report being engaged in home production, the direction of causality is less clear. Maybe women drop out of the labour force for other reasons and then report a focus on domestic activities. Also, it would be good to test whether this decline of participation occurs particularly among women with children of school-going age.

Piritta Sorsa (Why Do So Few Women In India Work?) from the OECD (Organisation for Economic Co-operation and Development) also focuses mostly on supply issues. Analysing data form 1987-2012, the study find a strong income effect, a negative (but over time declining) effect of husband’s education, a U-shaped own-education effect, a negative effect of children, marriage, and the presence of in-laws, and positive effects of access to finance and infrastructure, and access to Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) employment. Labour demand variables, (imperfectly) proxied by local employment structure, do not display a large impact.

Klasen and Pieters focus on the stagnation of participation of married females in urban areas. Using data form 1987-2011, they find that rising household incomes and husband’s education, falling labour market attachment of highly educated women, as well as adverse development in district-level labour demand, contributed to declines in female participation, while fertility decline and rising own education worked in the opposite direction, to generate a net stagnation. More generally, they argue that rising education and incomes are allowing women to get out of menial and undesirable employment, while jobs deemed appropriate for more educated women (especially in healthcare, education and public service) have not grown commensurately with the rise in female education, leading to falling participation among more educated groups.

The paper by Urmila Chatterjee of the World Bank (2015) shifts the focus towards labour demand and argues that the lack of availability of agricultural and non-agricultural jobs in rural areas appears to be driving the declining participation in rural areas. This is also consistent with claims made by G. Raveendran and K.P. Kannan a (Counting And Profiling The Missing Labour Force), and Ramesh Chand and S.K. Srivastava, who also see poor agricultural performance and the lack of non-farm rural jobs as the main driver.

Using aggregate data, Lahoti and Swaminathan (2016) study the effect of structural change on female labour force participation using state-level data. They find that structural change in India, which led to a rapidly shrinking agricultural sector in favour of a rapidly expanding service and construction sector, mainly contributed to the declining female labour force participation. The lack of a shift towards manufacturing and a persistently low female share in manufacturing ensured that the labour force as a whole did not become more female.

In summary, it appears clear that labour supply factors do play a role in depressing female incomes. It is difficult for married women with some education and children to be employed, especially if they have an educated and well-earning spouse. But labour demand also matters. Particularly in rural areas, it appears that declining agricultural employment has left a gap in employment opportunities for women as non-agricultural jobs have not emerged at the required pace.

Factors that need further investigation

But many questions remain open. The role of rising female education needs further investigation, as it is not associated with a commensurate rise in labour market attachment. Education appears to play other roles. Klasen and Pieters argue that it also plays a role in the marriage market, and Afridi suggest it affects productivity of home production. Second, the role of in-laws seems to differ across studies. Third, the role of policies needs to be investigated more clearly. More micro evidence on the effectiveness of employment policies is crucially necessary. Robert Jensen (Do Labor Market Opportunities Affect Young Women’s Work And Family Decisions? Experimental Evidence From India) provide interesting experimental evidence, but more is required here.

On the other hand, the role of macro, trade and structural policies also needs to be investigated. When comparing India with Bangladesh, one notices how an export-oriented, manufacturing-centred growth strategy has led to increasing female employment opportunities there. China, of course, also pursued such a strategy much earlier with similar impact on female employment. India’s growth strategy has focused on domestic demand and high-value service exports, which generate too few employment opportunities for women, particularly those with medium levels of education. Lastly, policies will be needed to tackle the social stigma that appears to prevent particularly educated women from engaging in outside employment. Here public debates of this issue and its impact on women are clearly necessary.