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Old December 1st, 2004, 02:14 PM
AdiDravida AdiDravida is offline
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A Business Case for Reservations

The Indian industry is often opposed to any kind of affirmative actions [even in state sector] for Dalits/tribals [hereafter, Dalits]. If the Indian state were to listen to the industry, there would have been no reservations for Dalits in government jobs.

Today, there are about 3.5 million Dalits in government jobs, courtesy, reservations. About a million Dalits who are likely to have set up small business in towns and cities are often products of reservations. After retiring from government services, Dalits often encourage their unemployed children to set up small business in towns and cities.

About half a million Dalits may have moved in to business due to soft loans provided by SC/ST finance and development corporations set by state governments.

Thus, according to my own estimates, reservation has produced about five million Dalits as part of India’s urban middle/lower-middle classes, giving a boost to the private sector.

Economics of job reservations:

As stated, about five million Dalit households, or twenty five million Dalits, considering a household in India comprises an average of five persons, have joined India's middle/lower-middle classes, thanks to reservation.

The twenty five million Dalits are therefore consumers as well. Creation of this mass of consumers hasn't occurred through the natural economic growth, but, through a pro-active state public policy.

How the private sector gains from reservations:

If most, if not all, India's urban middle/lower middle classes use truth brush, then the twenty five million Dalits too must be using tooth brushes. And if they, on a average, change a tooth brush once in six month, then of all the tooth brushes sold in India, fifty million units annually are purchased by Dalits alone.

If a tooth brush costs an average of Rs 10 per unit, then, Dalits alone contribute about Rs 500 million annually to the tooth brush industry.

Further, if a Dalit household is spending Rs 10 a month on account of toothpaste, then the five million strong Dalit households are contributing Rs 50 million per month, or Rs 600 million annually, to the toothpaste industry.

Assuming that India's urban middle/lower-middle class households buy at least two bath soaps and two washing shops a month, spending an average of Rs 30 a month, then the Dalits are contributing Rs 150 million per month or, Rs. 1,800 million annually to the soap industry.

And, if most urban middle/lower-middle classes shampoo their hair, the twenty five million Dalits too must be buying shampoo. If each reservation produced Dalit households is spending Rs 10 a month, then Dalits are contributing Rs 50 million per month, or Rs. 600 million annually to the shampoo industry.

Don't Dalit women spend on cosmetics? Do office going Dalit male keep beards and don't shave? Don't Dalit males shine their shoes?

Needless to add, the reservation produced Dalits too buy kitchen wares, TV sets, refrigerators, electrical gadgets, books, pen/pencils, cars, mobikes, cycles, mobile phones, cigarettes and bidiis, condoms, wrist watches, and travel in public transport system.

The reservation produced Dalits too buy houses, which, amongst others, require steel, cement. Don't such Dalits buy better clothing than rest of the community?

A fourth grade government employee [peon, driver or sweeper] gets a minimum of Rs 5,000 as his first salary. The proportion of grade fourth employees is less than five percent of the total government employees [Union and centre both]. A civil servant, at the time of retirement, may be getting Rs 30,000 a month. On an average, government employees [from grade fourth to grade one] must be getting a minimum of Rs 10,000 a month. So will be the case of the Dalit employees/officers.

Assuming that, India's middle/lower middle classes land up spending half of their earning on consumer goods [consider the final week of a salaried person], Dalits too must be following the similar pattern.

In that case, the 5-million reservation produced Dalits, are contributing about Rs 5,000 million [US $ 2.5 billion] per month, or Rs 3, 00,000 million [US $ 30 billion] annually to the India's private sector. Rest, [in form of savings, ultimately goes to the private sector.

How the private sector can benefit even more:

Supposing that the India's private sector accepts Affirmative Actions/Diversity for Dalits, and creates another 5 million Dalits who could the middle/lower-middle classes, the Dalits spending power may go up to another US $ 30 billion annually!

And, if all the over 250 million Dalits were converted into consumers, there would be an industrial revolution in India, where, the immediate beneficiary would be the private sector.

Caste system and crises of Indian economy:

In societies all over the world, with exception to the North America, often, traders graduated into manufacturers. With manufacturing turning into base of economies, corporatisation begun. The ownership pattern transformed. Corporations went public. Now there was no single owner of an industrial enterprise.

With growing mass participation in the ownership pattern through shares, a new economic phenomenon was unleashed. The market base expanded, from mere "market" of the middle classes, to "'mass-market".

Now, the society and industry, were mutually complimenting each other, unleashing
mass-industrialisation mass consumption societies. The individual-industry-society dissolved into a mass-economic unit. The developed world came into being.

Meanwhile, the traditional trading operations followed up, and imbedded the corporate culture. The more the businesses distanced from their past customs, methods, value system, the more the economy flourished. The developed world did not end inequalities, rather inequality index widened. But, then it did end mass poverty, and citizens got access to most basic requirements of life. A cab driver in Manhattan, or any of the European cities could buy the same TV, for instance, which Bill Gates may possess in his home.

The developed economies re-defined the very notion of wealth. The wealth was liberated from the "private" prisons, in the process, wealth became a social property. Earlier, it was a joy to be possessive of wealth. Now, it is a joy to dispose of wealth. The joy of spending became a craze. Now, the wealth once liberated, begun flowing in the air, inside the society, in market places.

The corporate world in developed economies partnered in the social transformation. The business operates in a social context. If the social context is backward, un-changing, the business too stagnates, retarding the economic growth. Thus, in order to earn more profits, the corporations turned big and the society needed to be transformed. After all, without a huge domestic consumer base, no corporation can turn big. In short, this has been the path the developed economies traversed.

The India case:

India is a caste society, with layers of hierarchies, the privileged and the underprivileged groups. While the victim groups, such as Dalits, would like the caste system to go, social group dissolve their caste identities. All must emancipate from their caste traits for India to become a civil society.

But, the privileged groups seek to retain the caste order so that the system of privileges too remains. In the process, the privileged groups retain their caste traits as well.

In India, the business has traditionally belonged to a particular social category called Vaishya or, a more commonly known lexicon, Bania.

If therefore the Baniyas were to graduate into manufacturers, they did. Barring few non-Baniya players, who joined business or manufacturing, they too got dipped into the Baniya value system.

Like rest of the other castes, Baniyas too are known for their caste characteristics: Baniyas are penny-pincher, who tend to convert their earnings into immovable property. Baniyas are socially more conservative, and a more close-social category.

Baniyas don't aspire to grow big in business. If the very business class which plays a key role in economic growth refuses to grow as big players, will it not retard economic growth?

Now, the Industry is largely owned, and operated by Baniyas. While technologically we are in a modern economic set up, but the process of industrialisation has been slow. Is it because the Indian corporate world is still Baniya by attitude, taste and aspirations.

Case of Narayan Murthy:

The Infosys Technologies chief is a role model to the India's middle classes. Child of a primary school teacher, a Brahman by birth, but Baniya by aptitude, he became a billionaire by applying his talent.

He is not a saint by profession, but leads life of a saint, considering the amount of wealth he possesses. He is a corporate Mahatma. Incidentally, Gandhi ji was a Baniya by birth. If the rumours doing rounds in Bangalore are true, he indeed is a Mahatma. He spends the least on his life. He eats less. Good for health. But, he changes his truth brush once in five years. The average longevity of his bath towel is four years, doesn't drink [even soft drinks], doesn’t smoke, don't change his shoes or pens. He doesn't use cosmetics, and average longevity of his shocks is about five years.

If the entire India took Mr. Murthy as a model consumer, then every industry will collapse. The Birla family is said to be living similar life style. Most of the so called corporate houses, business communities [Baniyas] live on three aspirations: Paneer (cheese), sweets, jewellery and fire works during weddings.

How economic stagnation occurs:

There is a limit to all things. A person for instance, employed by the Tatas, Birlas or Reliance, stops buying things over a period of time. One cant' despite a huge income aspire for five TV sets, three refrigerators , five cars, thirty bath soaps a day, and hundred condoms a week, or a new house every ten year. He/she may continue earning money which can count for all that mentioned above, but it loses its relevance.

Thus, there is an urgent need to bring in the new players in the market who have none of the consumer items as mentioned above.

To do that, the Indian industry must follow certain economic laws, as applicable to all the economies which have flourished. The USA is a fantastic example, where African American were brought into the market, and the American economy flourished.

The merit argument:

Since the debate on the Diversity/Affirmative actions begun, 'Captains' of the Indian industry have argued that "if reservation for Dalits is imposed, the Indian industry will lose its competitive advantage in the global market”.

The fact: India's share in the world trade by the year 2001, was at 0.67 percent, and is expected to achieve the one percent mark by the year 2007. China on the other hand has already achieved a 4.30 share in the global trade. China joined the global market
about a decade and half back, whereas India is there for over hundred years.

This shows that India has no advantage whatsoever in the world market. It is the Baniya mindset of the Indian industry, which harps on the falsehood.

Is India an IT super power? Well, the Indian industry would like to believe that. But, as a matter of fact, India's share in the World IT trade is just at 02.0 percent. Is it a question of shame, or pride for Indians? Where is the advantage which the Indian industry talks about?


The Indian industry must emancipate from its Bania mind-set, and look for profits, big in nature. To that end, it must turn modern, forward looking, and be parterre in expanding its consumer base. Affirmative action is a crucial factor, the industry must adopt it, and celebrate as well, for its own benefit, leave alone the Dalits.
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