Digital Payments and Gendered Labour Shifts in India: Driving Economic Transformation
Introduction
The rapid expansion of digital payments (DP) has revolutionised financial transactions, lowering transaction costs, increasing financial inclusion, and fostering economic growth. In India, a country marked by stark gender disparities in economic participation, the adoption of DP has presented a unique opportunity to examine its impact on labour market dynamics through a gendered lens. While DP offers greater financial autonomy and employment opportunities, its effects on men and women diverge due to structural barriers in the labour market.
For men, DP facilitates a shift from agricultural self-employment to formal wage employment, whereas for women, it reduces reliance on unpaid labour and enables a transition into formal work. This transformation, though promising, is not without its challenges, particularly in rural areas where digital infrastructure remains inadequate. This essay explores the extent to which DP is reshaping labour allocation, promoting gender equity, and driving India’s economic modernisation.
Digital Payments and Labour Market Shifts: A Gendered Analysis
India’s labour market has long been dominated by agricultural employment, despite its declining contribution to GDP. While approximately 42% of the workforce remains engaged in agriculture, the sector accounts for only 16% of the nation’s economic output, reflecting its low productivity and informal nature. Compounding this issue is the persistently low female labour force participation, which stood at just 24% in 2022.
Women, in particular, have been disproportionately engaged in unpaid domestic and farm labour, with limited access to formal employment opportunities. Against this backdrop, the proliferation of DP, accelerated by government initiatives such as Digital India, the Unified Payments Interface (UPI), and the disruptive effects of demonetisation in 2016, has emerged as a transformative force. Between 2018 and 2019 alone, DP transactions in India surged by over 285%, underscoring a growing shift towards cashless transactions and formal financial systems. This shift has profound implications for labour market participation, particularly in enabling financial access for women and fostering structural economic transformation.
Empirical evidence suggests that DP adoption has led to a significant reallocation of male employment. A 1% increase in district-level DP has been associated with a 1.2 percentage point increase in aggregate male employment, driven primarily by a 4.8 percentage point rise in regular wage employment. Simultaneously, there has been a 2.7 percentage point decline in self-employment, alongside reductions in casual employment and unpaid self-employment. This trend indicates that DP plays a crucial role in linking male workers to formal employers who prioritise traceable, digital wage disbursement over cash payments.
The increasing integration of digital platforms in job markets, particularly in urban centres, has facilitated greater employment opportunities in services and manufacturing, sectors where formalisation is more prevalent. For men, DP acts as a bridge to more stable, higher-paying employment opportunities, effectively reducing dependence on subsistence agricultural work.
For women, however, the impact of DP is more complex. Unlike men, the overall effect of DP on female employment is not statistically significant in aggregate terms, suggesting that structural barriers continue to hinder their full integration into the labour market. Nevertheless, DP adoption has been instrumental in shifting women away from unpaid and insecure forms of employment. A 1.7 percentage point increase in regular wage employment has been recorded for women, accompanied by a 2.3 percentage point decline in unpaid self-employment and a 1.0 percentage point reduction in casual employment.
Unlike their male counterparts, women’s overall self-employment remains relatively stable, pointing to a nuanced labour reallocation rather than outright employment growth. These findings suggest that while DP does not immediately translate into increased employment for women, it facilitates their transition from informal, unpaid labour to formal wage-earning roles—a critical step towards greater financial independence and economic agency.
Time Allocation, Financial Autonomy, and Earnings Growth
Beyond employment shifts, DP adoption significantly influences how individuals allocate their time between paid and unpaid work. The increase in male employment is mirrored by changes in time-use patterns, with men spending an additional 6.7 minutes per day in paid activities, primarily in self-employment and wage employment.
The reduction in agricultural self-employment among men has freed up time for engagement in more productive, income-generating activities, contributing to overall earnings growth. Women, too, experience shifts in time allocation, with a 7.8-minute increase in regular wage employment, primarily driven by a decline in unpaid domestic work. These shifts in time-use patterns indicate that DP is enabling individuals to move away from low-productivity, informal work towards more structured employment opportunities.
Crucially, DP-driven employment gains translate into tangible wage increases for both men and women. Data suggests that earnings have risen across both self-employment and regular wage employment, with no statistically significant gender disparity in income growth. This suggests that DP is playing a role in narrowing the gender wage gap by facilitating equal access to financial resources and employment opportunities.
However, while women benefit from increased earnings, they continue to face social and cultural constraints that limit their ability to fully capitalise on these financial gains. Women’s financial autonomy remains a key area of progress, with DP adoption leading to a 4.9 percentage point increase in women’s control over financial resources, empowering them to make independent economic decisions.
Digital Payments as a Catalyst for Economic Modernisation
The impact of DP extends beyond employment and earnings, shaping broader economic and social transformations. The adoption of digital financial tools has significantly enhanced access to banking, mobile money, and internet connectivity, particularly for women. A 1% increase in DP adoption has been linked to a 7.4 percentage point rise in mobile phone ownership among women, compared to just 1.1 percentage points for men.
Similarly, internet usage has increased by 8.2 percentage points for women, outpacing the 6.9 percentage point increase among men. These trends highlight the role of DP in bridging the digital divide and expanding women’s participation in the digital economy. Increased mobile and internet access allows women greater flexibility in managing their finances, engaging in online work, and participating in e-commerce, further strengthening their economic agency.
The sectoral shifts facilitated by DP adoption also underscore its role in modernising India’s economy. For men, DP integration has accelerated the decline of agricultural employment, with a 6.3 percentage point reduction in agricultural self-employment, offset by a 7.5 percentage point rise in non-agricultural employment.
For women, a similar shift away from unpaid and agricultural work towards non-agricultural wage employment is evident, albeit to a lesser extent. These findings reflect a broader trend of structural economic transformation, in which DP acts as a lever for transitioning the workforce from low-productivity subsistence activities to higher-productivity formal employment sectors.
Challenges and Policy Considerations
Despite its transformative potential, the expansion of DP is not without its challenges. The benefits of DP adoption remain unevenly distributed, with urban areas experiencing far greater gains than rural regions. The digital infrastructure gap in rural India limits access to mobile banking, internet services, and formal employment opportunities, exacerbating existing inequalities.
Additionally, while DP enables women’s participation in paid employment, it does not necessarily address the issue of the ‘double burden’, wherein women must balance both paid work and unpaid domestic responsibilities. Without broader social changes to redistribute care work, the transition to formal employment may inadvertently increase women’s overall work burden.
To maximise the benefits of DP while mitigating its limitations, policymakers must prioritise:
- Expanding digital infrastructure in rural and underserved areas to bridge the urban-rural divide in DP adoption.
- Enhancing financial literacy through targeted education programmes, particularly for women and marginalised communities.
- Developing digital financial products tailored to women entrepreneurs and small-scale businesses.
- Strengthening labour protections to ensure that DP-driven formalisation translates into secure, well-paying jobs rather than precarious gig work.
Conclusion
Digital payments are not merely a technological innovation but a transformative force reshaping India’s labour market. By enabling men to transition from informal to formal employment and facilitating women’s entry into wage-based work, DP is advancing both gender equity and economic modernisation. However, realising its full potential requires concerted efforts from policymakers, financial institutions, and civil society to ensure that DP-driven economic growth is both inclusive and sustainable. As India continues its digital transformation, leveraging DP for broader social and economic policies offers a promising pathway towards a more equitable and prosperous future.
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