# **1 Introduction**

Across the globe, women face unequal economic opportunities and constrained choices in their income generating activities; the situation is much worse in South Asia, especially India (Chaudhary and Verick 2014). Even the challenges of poverty are borne by women inequitably (Sen 2001). In rural India, women from poor households face additional challenges of lower education levels and lesser ability to contribute to intra-household decision making. Better economic opportunities and enhanced employment are often cited as key pathways for reducing gender inequality (Gradín, del Rio, and Cantó 2010). The factors that make it very difficult for rural women to find salaried jobs primarily include low education levels (skills and training) or to initiate entrepreneurial activity due to credit access (Islam and Pakrashi 2014, Boucher, Carter, and Guirkinger 2008), and disempowerment in the community (Gillespie 2004) etc.).

Thus, when women with the potential of being employed or the potential to undertake entrepreneurial activities, are unable to do so, this leads to low female labor force participation (FLFP) in India, which then slows down the growth of the rural economy. (Chaudhary and Verick 2014). From 1972 to 2013, FLFP in India has declined from 31.8 percent to 26.7 percent (Sanghi, Srija, and Vijay 2015, Government of India 2011b, International Labour Organization 2013). Similar trends of decline have been observed in the rural workforce participation ratio (WPR) as seen in the last population census (Government of India 2011a) from 30.79 percent in 2000-01 to 30.02 percent in 2011. Furthermore, there is almost a 50 percent gap between male and female participation rates.

According to Chatterjee, Murgai, and Rama (2015), the most important reason for the decline of the rural FLFP in India has been reduction in agricultural jobs despite the commensurate emergence of other employment opportunities. The need to design policies and programs to enhance the economic and livelihood activities of women is more urgent than ever, and reduction in gender inequality and increased female empowerment has clear and significant economic benefits (Duflo 2012). Recently, policy makers from all over the world have focused on promoting entrepreneurship, with a specific focus on women entrepreneurs. It is assumed that entrepreneurship can transition more women into the labor force through self-employment and indirectly by creating livelihood opportunities for other females, as women entrepreneurs are more likely to hire more female workers (Ghani, Kerr, and O'Connell 2014).

Until recently, micro-credit programs were among the most prevalent interventions in many countries that were expected to promote poor households into becoming microentrepreneurs and enhancing their business activities (Arouri et al. 2014). Hence, large resources have been, and continue to be channeled into programs and companies providing small loans, with the expectation that the poor would buy productive assets and grow their small businesses. However, evidence from most micro-credit experimental studies has not been successful in finding significantly favorable results on income, assets and profits of enterprises (Banerjee, Karlan, and Zinman 2015, Banerjee 2013, Kaboski and Townsend 2012), except a single study in Uganda (Fiala 2013).

More recently, experimental evidence has emerged that suggests that instead of providing loans, transfer of direct unconditional grants can sufficiently encourage entrepreneurial activities. Recent studies have found large and significant impact of unconditional grants to poor households on their income (Blattman et al. 2013, Baird, McIntosh, and Özler 2011, Haushofer and Shapiro 2016, Blattman, Fiala, and Martinez 2013, Arnold, Conway, and Greenslade 2011) but the long-term effects of these grants are still not clear (Haushofer and Shapiro 2018). Similar studies in other parts of world have also found positive outcomes of 2