Shaktikanta Das proposes a new plan to correct a long-standing imbalance in India’s labour market

In a message aimed at encouraging job creators to try to correct a long-standing imbalance, the governor of the Reserve Bank Shaktikanta Das On Thursday, Das highlighted the critical role of the financial sector in bridging the gender gap by increasing employment opportunities for women and customised financial plans for women-led businesses. Speaking at the FIBAC Annual Conference 2024, organised by FICCI and IBA, Das highlighted the relatively low participation of the female workforce in India and stressed the need for targeted initiatives to address this issue.

Das stressed the importance of inclusive growth and said a truly developed India should ensure that all citizens, irrespective of their socio-economic status, have access to financial services and necessary financial literacy.

Need for specific movements

India’s female labour force participation rate remains below the global average. According to Das, this gap requires specific initiatives, such as improvements in girls’ education, skills development, workplace safety and removing social barriers that prevent women from entering the workforce.

She noted that entrepreneurship is a crucial part of economic empowerment, but in India, less than one-fifth of micro, small and medium enterprises (MSMEs) are owned by women. Women entrepreneurs face many challenges, such as limited access to capital, restrictive social norms and difficulties in obtaining affordable financing.

“The financial sector has a crucial role to play in bridging this gender gap by implementing supportive policies, creating tailored financial products and leveraging fintech innovations to provide better access to finance,” Das said.

Two main approaches

Das suggested two main approaches for the financial sector: increasing employment opportunities for women within financial institutions and supporting women entrepreneurs through government-sponsored schemes and bank-specific initiatives designed for women-led businesses. She also proposed that banks could actively explore hiring more female bank “saathis” or “sakhis,” particularly among members of self-help groups (SHGs). According to Das, given India’s large youth population, tapping the full potential of MSMEs is essential to boost employment and economic development. Despite their importance, many MSMEs remain small and struggle to grow due to various challenges, with access to affordable finance being a major barrier.

Creating jobs in the SME style

“Banks and financial institutions can develop tailored financial products and services that specifically meet the needs of MSMEs,” Das said. “This includes offering flexible credit options, improving access to working capital, and providing financial support that is tailored to the particular cash flow cycles and growth stages of MSMEs.”

These measures can help MSMEs expand, improve their productivity and contribute more significantly to job creation, Das said.

The governor also noted that the Indian economy is making solid progress, characterized by macroeconomic and financial stability and a favorable balance between growth and inflation. He attributed the strengthening of the fundamentals of the economy and the creation of important buffers to the policy mix implemented in recent years.