MSMEs need Childcare: Enabling Women’s Work and Stronger Enterprises

By Karina Bhasin and Akanksha Saluja / UNDP India

June 26, 2026

For millions of women working in India’s micro, small and medium enterprise (MSME) sector, the decision to continue working is often determined not only by opportunity, but by whether safe, reliable, and affordable childcare is available.

India’s MSME sector is a critical pillar of the economy, supporting more than 110 million jobs and sustaining livelihoods across urban and peri-urban regions. Women are an important part of this ecosystem, particularly in labour-intensive sectors. However, a barrier outside the workplace continues to shape women’s ability to participate and remain in the workforce: access to quality childcare.

As urbanisation accelerates and household structures evolve, childcare needs are becoming increasingly central to India’s workforce story. For MSMEs, particularly smaller enterprises, childcare challenges translate into workforce disruptions – absenteeism, reduced retention, and difficulties in sustaining a stable workforce.

Childcare, therefore, is not only a social service. It is a critical piece of economic infrastructure that enables women’s participation while strengthening enterprise productivity.

Care, Work, and the Missing Link in MSME Systems

Across labour markets, unpaid caregiving responsibilities remain one of the key factors influencing women’s decisions to enter, stay in, or exit employment. This is not simply a matter of individual choice; it reflects a structural gap where childcare services remain fragmented, inaccessible, or unaffordable.

The challenge is shared by enterprises as well. Micro and small enterprises, which make up the majority of India’s MSME ecosystem, depend heavily on a regular and predictable workforce. When care responsibilities are unmet, businesses experience increased absenteeism, interrupted participation, and reduced workforce continuity.

Evidence from workplaces with childcare support shows improved attendance and employee retention. Recognising this linkage, policy frameworks such as the Maternity Benefit (Amendment) Act, 2017 have mandated creche facilities for establishments with 50 or more employees.

However, many MSMEs operate with limited space, resources, and administrative capacity. Individual enterprise-level childcare provision is often difficult to establish and sustain, creating a gap between policy intent and practical implementation.

The need for childcare is significant. An estimated 6–7 million women in low-income urban households currently require full-day childcare services in industrial and employment clusters, with demand expected to grow substantially in the coming decades. Yet, childcare supply remains fragmented.

Group of women sitting cross-legged on a colorful preschool classroom carpet. — UNDP India

Moving from Enterprise-Level Solutions to Shared Infrastructure

The solution lies in reimagining childcare as shared infrastructure.

Individual MSMEs may struggle to establish childcare facilities on their own, but clusters of enterprises can collectively create the scale needed for safe, professional, and sustainable services.

To address this gap, UNDP India, in partnership with the Ministry of Housing and Urban Affairs (MoHUA) and with support from the Gates Foundation, is implementing a cluster-based childcare model under the initiative “Boosting Female Labour Force Participation through Strengthened Urban Childcare.”

The model brings together multiple enterprises within the same industrial ecosystem to collectively support childcare services. Instead of each enterprise creating separate facilities, workers from different organisations can access a common childcare centre designed around shared demand.

In Hyderabad, the model is being implemented in partnership with the Association of Lady Entrepreneurs of India (ALEAP) and the Confederation of Women Entrepreneurs (COWE). Industrial associations are supporting the model by providing space for childcare centres, while participating employers and employees contribute towards sustaining services.

Early implementation lessons highlight that successful adoption depends on more than infrastructure. Trust, quality assurance, affordability, and reliability of services are essential to encourage families and enterprises to transition from existing informal care arrangements to organised childcare solutions.

The model also demonstrates that childcare is not a standalone service — it is a shared ecosystem requiring collaboration between employers, workers, communities, and service providers.

Childcare and the Growth of India’s Care Economy

The benefits of investing in childcare extend beyond enabling women to remain in the workforce. A stronger childcare ecosystem also creates new employment opportunities within the care economy.

Professional childcare services require trained caregivers, supervisors, and early childhood development professionals, creating pathways for women’s employment in a sector that remains essential to India’s social and economic infrastructure.

At scale, investment in care systems has the potential to generate millions of jobs while addressing one of the most persistent barriers to women’s workforce participation. Strengthening the care economy is therefore both a gender equality priority and an economic opportunity.

The Way Forward: Childcare as a Foundation for Inclusive Growth

The experience from the cluster-based childcare model demonstrates that shared solutions can help overcome structural barriers faced by women and MSMEs alike.

When childcare services are accessible, women are better able to continue their livelihoods, enterprises benefit from a more stable workforce, and communities experience stronger economic resilience.

As India advances towards higher levels of growth and inclusion, childcare must be recognised as a core component of economic infrastructure – one that supports women’s participation, strengthens enterprises, and builds a more inclusive future of work.