India lags behind the world in terms of gender parity, says McKinsey

22 May 2018 Authored by Consultancy.in

A new report from Mckinsey & Company on gender parity in the Asia Pacific region has revealed that levels of inequality in India are greater than most of its regional counterparts, and far greater than the global average. Improvements to these ratios to regionally comparable levels could add nearly $800 billion to India’s annual GDP, as per the report.

In a bid to promote the urgency around gender equality initiatives across the globe, consulting firms have increasingly been highlighting the economic cost of gender inequality. This trend gained momentum in 2015, when accounting and advisory firm Grant Thornton published a report stating that a lack of women in senior leadership roles potentially costs the US, India, and the UK $655 billion in GDP per year

In the same year, management consultancy McKinsey & Company published a similar analysis for the entire global economy, revealing that increasing female participation in the workplace could add $12 trillion to the global GDP by 2025. The report was compiled by the McKinsey Global Institute – the firm’s research and insights division –, which has now released a detailed study of the Asia Pacific market.

Collectively, the Asia Pacific region could benefit by as much as $4.5 trillion by 2025, provided that each country subscribes to the level of parity currently being achieved by the most equal country in the region; described by the report as the “best-in-region” scenario. Australia, New Zealand, Singapore and the Philippines are amongst the countries with the highest gender parity levels.

Relative benefit to India's GDP from gender equality

The economic benefits are distributed unevenly across the region, based on a range of factors such as the existing levels of female participation in the workforce, education levels amongst women, financial and digital inclusion, legal protection and political voice. In absolute terms, China has the largest amount to be gained from promoting equality, at $2.6 trillion.

In relative terms, however, India is the country that stands to gain the most from inclusion, with the potential to increase its usual GDP by a staggering 18% through increased participation, amounting to a total of $770 billion by 2025. Nevertheless, the high potential is nothing more than a representation of the poor state of affairs in the current scenario.

Late last year, the Boston Consulting Group released a report detailing how gender diversity initiatives in the Indian business environment are misdirected in their current form. This manifests itself in McKinsey’s findings, which place the contribution of women to India’s GDP at 18% – the second lowest figure in the entire region, ahead of only Pakistan. 

Share of female contribution to India's GDP

The figures paint a poor picture, given that the global average of female contribution to the GDP stands at 36%, which is identical to the average across the Asia Pacific region. The problem is accentuated by the fact that India’s figures are at par with those in the Middle East and North Africa, where many countries forbid women to work by law. 

The primary issue is one of participation. Currently, only a quarter of the workforce in India is female. As per the report, increasing this figure by a mere 10% could contribute just over $550 billion to the Indian GDP by 2025, representing 72% of the total economic benefit that India could gain.

The remainder of the economic benefit can be derived from increasing female presence in more productive roles (19%), and increasing the number of hours worked by women (9%). However, there are significant barriers to improving this scenario, in addition to the poor participation ratio.

Actual benefit to India's GDP from gender equality

One such challenge is the level of unpaid care work carried out by women in India, which stands at ten times the amount carried out by men. If the volume of unpaid work carried out by women was compensated even with the minimum wage, India’s economic output could increase by as much as $300 billion.

Legal protection offered to women is another challenge, wherein the existing infrastructure is sufficient in terms of sexual harassment and paid maternity leave, but legal mandates for equal pay and parental leave are severely lacking. Deficiencies in the legal framework can further be attributed to another key challenge – unequal legislative representation for women. A mere 11% of the members of parliament in India’s lower house are currently female.

Other challenges include crucial socio-economic challenges such as sex-selective abortions and violence against women. The report states, “India should be further ahead on tackling gender inequality, given the correlation between economic development and progress on gender inequality globally. In 2016, 26 countries in our data set had a lower per capita GDP and Human Development Index than India, but 21 had achieved more progress towards gender parity than India—indeed, 13 had lower inequality on seven out of the 15 indicators for which we had comparative data.”

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