While the LFPR for rural men declined by 3 to 4 percentage points over the period 1999-00 to 2011-12, the magnitude of the decline was much larger for rural women, with their LFPR falling by 8 to 10 percentage points regardless of the measure of employment used. The decline was particularly pronounced after 2004-05, when the female LFPR fell by 12-14 percentage points, in contrast with the much steadier and slower decline in the male LFPR. In urban areas, there was little change in the LFPR of both males and females in this period. But the rural-urban gap in LFPR for females was consistently higher than for males (15-25 percentage points versus 6-10 percentage points).<sup>1</sup> India’s decline in rural female LFPR has understandably received considerable attention in the public debate. It is intuitively clear that this decline ought to be connected to the large gap in LFPR between rural and urban areas. And the two patterns taken together are a matter for concern. As argued in the recent _Gender_ and _Jobs_ World Development Reports (World Bank, 2011 and 2012) gainful work by women, and especially paid employment, is correlated with their agency at the household level and in society more broadly, contributing to better development outcomes. In a context of rapid urbanization, these two patterns do not bode well for India’s future.

Some decline in LFPR can be expected with development. At a cross-country level, authors such as Goldin (1994) and Paxson et al. (2000) have argued that there is a “U-shaped” pattern in female LFPR. At low levels of income female LFPR tends to be high, as poor people need to work more to maintain a certain standard of living. Moreover, if there is a shift from agriculture to manufacturing, the nature of factory work could discourage women from participating. But as the economy develops and there is an associated expansion in the services sector and fertility rates decline, there could be an increase in LFPR, especially that of educated females. The nature of the jobs in the services sector may be more attractive to females compared to factory work. In addition, women’s relative wages may rise due to the comparative advantage they have over men in the service sector jobs. Thus, a combination of preferences and relative wages may lead to a higher female LFPR at higher levels of income.

A large body of academic work has also been devoted to explaining the decline of female LFPR in India’s specific case. Its findings are consistent with the country being on the declining portion of the U shape, although with some important nuances. The literature includes studies by Olsen et al. (2006), Chowdhury (2011), Himanshu (2011), Rangarajan et al. (2011), Kannan et al. (2012),

> 1 Some authors have argued the spike in LFPR in 2004-05 does not square with the general economic trends in the period preceding the survey (e.g., Sundaram and Tendulkar (2006), Unni and Raveendran (2007) and Chandrashekhar and Ghosh (2007)). However, the data from the thin year rounds of the NSS shows that LFPR of females was increasing at a steady rate in the years between 1999-00 and 2004-05 and dropped steadily thereafter, thus weakening the argument that the NSS 2004-05 survey results are an outlier.

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