Indian Daycare System: Increased budgetary focus for a truly high return on investment

Karishma Dixit
4 min readJan 30, 2021


Where would you find toys of all shapes and sizes, multi — coloured walls, chaos and discipline; and a solution for one of India’s most pressing economic worries?

Hopefully, this question will feature in the next season of Kaun Banega Crorepati, and if you are in the hotseat, please do remember to give this article due credit for the answer!

Transforming daycare facilities for working mothers could give India’s rapidly dwindling Female Labour Force Participation Rate, known simply as FLFPR, a much-needed fillip. It won’t be a quick fix: the sector needs central regulation and increased budgetary allowance, not to mention support from awareness campaigns promoting its benefits and battling gender stereotypes. But a start needs to be made, and that too quickly.

Recent data released by Centre for Monitoring Indian Economy (CMIE) on FLFPR shows a dramatic fall from 16.4% in May’16 to 9.36% in May’20. Further alarming is that in 2019–20, FLFPR among urban women was 9.7% against 11.3% among rural women.(1) Several economic shocks in the past such as demonetization and GST have caused the decline, which got further accentuated during the pandemic.

Some point to the “marriage and motherhood penalty” that women pay and withdraw from the workforce due to household and care responsibilities. To ensure continuity of females in the workforce once they become mothers, adequate and appropriate daycare facilities are a must, which today is a concern in both rural and urban areas.

Two core matters need to be addressed — widespread reach of facilities as well as quality of services offered.

National Crèche Scheme (NCS):

The NCS, which provides daycare facilities to children (from 6 months to 6 years) of poor and low-income families, has not achieved the desired impact. Infact, as of March’20, there were 6,453 crèches(2) operational across India, down from 23,588 crèches(3) in 2015, a drop of 73%; simply put, compared to 4 in 2015, just 1 crèche functioned in 2020 under the Scheme.

Experts believe that this fall is primarily due to the change in funding pattern of the Scheme from a central scheme to a centrally sponsored scheme in 2017 (4). Certain states have not shown the same level of interest in implementing the scheme, resulting in the dramatic decline.

Additionally, the salaries paid under Scheme are low –crèche worker gets paid Rs. 3,000 p.m.; the helper is paid Rs. 1,500 p.m. The low pay, coupled with delays in payment, forces crèche employees to take up other part time jobs to supplement their income and consequently, may pay lesser attention to their duties under the Scheme.

Private crèches:

Daycare facilities in India, baring a few institutionalized chains, are either pre-dominantly home-based or are standalone establishments. There is limited regulation enforcement/ monitoring at such centres. Further, during the pandemic several smaller daycare facilities have been shuttered. For those which have not, in the absence of any stimulus benefits for them, there is no visibility on when they will be able to function at their full capacity. This has impacted FLFPR significantly given that over 80% of daycare facilities are owned and operated by women. Every such facility shutting down, causes at least 2 women (1 primary caregiver and 1 helper) employed directly, and several others employed indirectly, to lose gainful employment.

With increasing urbanization and nuclearization of families, to be able to tap the vast potential of the female labour force and avoid prolonged break in their employment, institutionalized daycare facilities must be encouraged. Setting up of a crèche facility is mandated under Maternity Benefit (Amendment) Act, 2017 for establishments having 50 or more workers, but till date, only two states have notified relevant rules, and one has only issued draft rules.

The recently announced Code of Social Security 2020 subsumes the Maternity Benefit Act, 1961 and provides several clarifications on issues which were ambiguous, but a core issue that remains to be addressed, which has been a major deterrent to working mothers availing such facilities are the quality of such services and minimum standards of safety and security that need to be maintained at all times.

What needs to be done?

The budgetary allowance by the Central Government in FY20–21 to the Scheme was Rs 75 crores with each crèche receiving an annual grant of Rs 137,440. Both the annual grant per crèche and the total number of crèches needs to be increased dramatically. Why? Based on 2011 census data, 18 lakh women could be added annually to the workforce in urban areas, who could avail such facilities. This would require 73,000 crèches to be set up (based on 25 children per crèche) and Rs 1,010 crores in funding (based on the current grant given per crèche).

There is a need to establish a central body at the State level that is responsible for registering, licensing and monitoring crèches, with strict penalties imposed on non- adherence of guidelines, including cancelling of licenses. While certain daycare management companies do provide audit and certification services, building confidence in the sector will require this to be mandated under law.

The sector needs to be regulated, granted “industry” status, and eventually tagged as an “essential service” with tax deductions and other benefits to the providers of these facilities, like other industries.

Crèches can have a multiplier effect in female employment and can potentially increase FLPR by 2–3% over the next 5 years, if we focus on it, as our friendly neighbours Bangladesh and Nepal did.


1. Mahesh Vyas, Female workforce shrinks in economic shocks, December 14, 2020 —

2. Lok Sabha Questions 2020 —

3. Lok Sabha Questions 2015 —

4. Prior to 1.1.2017, the central scheme meant that the Central Government funded 90% of the expenses and 10% was met by NGOs. Post that as a centrally sponsored scheme the funding pattern changed as Central Government 60%, 30% State Government, 10% NGOs.