economic exclusion and inclusive policy - 4
Depending on the nature of discrimination and exclusion, the methods used to overcome caste-based discrimination in the Indian private sector should consist of all the three practices, namely reparations, equal employment opportunity legislation and reservation or affirmative action.
In the background of the international experience, I now make some suggestions for reservation for lower castes in various economic spheres, including the market and the private sector in India. I discuss possible solutions by taking each economic sphere and market separately.
How and in which form to extend the exiting public sector reservation policy for lower castes to the private sector is an important issue. The elements of reservation policy for the private sector will be determined by the nature of market and non-market discrimination suffered by the lower castes. The empirical evidence clearly indicates that lower castes suffer from discrimination in the private sector not only in the labour market and wages but also in the capital market, agricultural land market (including the urban land market), input or factor market, wholesale and retail consumer markets, and in access to basic services such as private education and private housing. How to provide protection to the groups discriminated against in these multiple ways is the key issue which participants in the discussion on reservation have not recognised. Any reservation policy for the private sector would have to address the issue of discrimination in various markets and come up with anti-discriminatory measures covering all market exchanges. In fact, although there is no reservation policy in the private sector, the government has selectively intervened on a small scale in capital markets, agricultural land markets, urban land markets and other such spheres. The establishment of the SC/ST Finance Corporation and preference in allocation of surplus agricultural land and urban land for business are in the nature of informal affirmative action measures. Although the aim of these measures has been to improve private ownership of fixed capital assets such as agricultural land, the scope of these interventions has been extremely limited and informal.
The lower castes are mainly wage labour. Of the total SC workers, rural and urban, more than sixty per cent are wage labour, regular or salaried. The selective evidence indicates the presence of significant discrimination against SCs in hiring and fixing wages which is unrelated to productivity. At present, the private sectors where the majority of SC/ST workers are engaged include agriculture and the private industrial and service sectors. Since there is a high involvement of SC/STs in the agricultural sector, mainly as agricultural labour, there is no need for reservation in the agricultural labour market. However, given the selective discrimination in hiring and fixing wages, legal protection in the form of equal employment opportunity law is called for.
In the industrial and service sectors, there is possibly a high level of discrimination in employment in certain categories of jobs, if not all. Here, the government should use equal employment opportunity legislation and supplement it by affirmative action or reservation in terms of quotas, identical to the present reservation policy in public sector employment. Equal employment opportunity legislation would deter employers from discriminating. Reservation with quotas in certain categories of jobs would ensure fair participation of SCs in industrial employment. In order to make the employment pattern transparent, all firms should be asked to register with an equal employment opportunity office with information on the social composition of their employees. This is being done in Northern Ireland, for instance.
In recent years, the UN has also laid down some employment norms for multinational companies under the provisions of equal employment opportunity and the Global Compact. Companies are required to observe equal employment policies with respect to various groups. The Indian government could develop an understanding with multinational companies to follow certain provisions of affirmative action policy on a voluntary basis in recruitment and other activities.
Agricultural land markets
Over 80 per cent of lower caste people still live in rural areas. Three-fourths of all SC households are either landless or almost landless, owning less than an acre. The high incidence of landlessness among the SCs is the result of customary restrictions on ownership of agricultural land which were in force in the past. Now, the SC person suffers from discrimination and even exclusion from access to agricultural land. Evidence from studies indicates that a high proportion of the atrocities and violence directed against them are related to land issues. So the problem of landlessness of the SCs is still formidable. With the exception of some preference in allocation of surplus land and public land, no serious effort have been made to correct the impact of this historical exclusion from land rights.
What is the international experience in this area? Policies of empowering groups which have suffered historical injustice with respect to ownership of land have generally fallen within the framework of reparation and compensation. Affirmative action programmes have largely been designed to address present discrimination. They do not, in general, aim for compensation for past injustices or denial, nor do they provide a vehicle for redress of wealth disparities. Therefore, the land question has been dealt with in some countries in the framework of reparation or compensation.
The Malaysian programme of improving land ownership of Malays (or Bhumiputras) is quite important in this context. In order to improve access to agricultural land, Malays were given special land rights, including the reservation of large tracts of agricultural lands. More than 90 per cent of settlers under the massive programme of the Malaysian federal land development authority were Malays.
In India, giving priority in the distribution of land to SC/STs has not helped much. In a large number of cases, although the government has conferred the right to surplus and public land, actual possession has been problematic. Perhaps people should be actually settled on the land, like in Malaysia.
The government should create a pool of common land free of legal encumbrances and place it under the control of a specific authority, which can distribute it to landless SC/ST households without bringing any other party into the picture. As a one-time settlement, SC households should be given a minimum quantum of agricultural land as compensation for denial of land rights for several centuries. This could be one way of distributing land in a manner which avoids conflict. Other methods have not helped the SCs to gain access to agricultural land.
Traditionally, the lower castes were not only denied ownership of agricultural land but also debarred from undertaking any business. This is reflected in the low proportion of self-employed SC/ST households. In 2001, about 12 per cent of all SC households in the rural areas and 27 per cent in urban areas were engaged in some kind of self-employed business activity. This ratio is much lower than the 41 per cent and 36 per cent rates for non-SC/ST households in rural and urban areas respectively. Besides, the SC households are mainly engaged in petty businesses with low turnover. Therefore, the incidence of poverty among them is relatively high — in the early 1990s about 38 per cent of SC business households in rural areas and almost 55 per cent in urban areas were poor. These ratios were again much higher than the 29 per cent and 35 per cent figures in rural and urban areas for non-SC/ST households.
The fact that SC households are in petty business indicates their lack of access to capital for investment. The government has intervened through public finance institutions such as nationalised banks and special institutions for SC/STs, which supply the capital for businesses and industries operated by SC persons. However, private capital is completely free from any obligation towards SCs.
Given serious moves towards privatisation of financial markets, it is necessary that the government should develop a reservation policy for SC/STs in the capital markets. The main issue is how to increase the participation of SC/STs in private capital in the form of industries and businesses. Some countries such as the USA and Malaysia have developed affirmative action policies in this direction. The Indian government can learn quite a lot from the policy in Malaysia and develop a strategy of providing access to private capital. The affirmative action policy can be developed on the following lines:
(a) The government and public finance institutions should have a specific policy for supply of capital to SC/ST-owned businesses. A certain specific proportion of capital should be fixed for this particular group for business and industry and other economic activities.
(b) The government should also develop some sort of reservation policy for private financial institutions, including banks, such that they allocate or supply a certain amount of capital or finances to SC/STs for industry and business.
(c) Government policy must promote the participation of SC/STs in private capital — in ownership of shares, debentures and other financial instruments. How do we increase the share of SC/STs in private sector equity and improve their ownership in industry and trade? The Malaysian government has set up the Investment Foundation and National Equity Corporation for Malays, which ensures that the minority community gets an appropriate percentage of shares in companies. Our government should set up a similar body to help SC/STs participate in the share capital of various companies. In Malaysia, the government has also developed a policy to increase the participation of the minority community in foreign companies.
The legally sanctioned, systematic redistribution of private capital ownership to minorities was accomplished under the aegis of the New Economic Policy (1970-1990) in Malaysia. Under this policy, the share of Malaysian corporations owned by native Malays rose from 2 per cent to 30 per cent in two decades.
The SCs and STs suffer from poor access to factors of production in agriculture and industry. The government should develop a policy of having some reservation and preference in the supply of certain inputs of production by the government as well as by private parties. This may include various inputs into agriculture and industry and particularly, public utilities and services.
The SCs and STs suffer from discrimination in wholesale and retail markets in consumer goods. This discrimination is in terms of access to infrastructure such as space and other amenities, and selective restriction on the sale of goods. The government should develop a reservation policy for wholesalers and retailers from the SC/ST community on the following lines:
1. Government and private sector participation in the purchase and sale of goods is quite massive and the SC/ST suffers from exclusion from this market. Madhya Pradesh has taken a major initiative in providing for a quota in government purchase orders for the benefit of SC/STs. This is important way to provide a market to the SC/ST businessman.
Government and the private sector engage in several economic activities — purchase of consumer and non-consumer goods, contracts for the construction of roads, buildings and irrigation facilities, etc. There are hundreds of such activities in which a specific share should be fixed for SC/STs. A complete, detailed policy will have to be worked out for the SC/STs vis-à-vis government participation in various activities.
2. The government should develop a policy for the purchase of agricultural produce such as vegetables, flowers, fruits, milk and poultry by itself and the private sector, since SC/ST farmers and retailers face discrimination in markets in the sale of several commodities on account of ideas of untouchability and pollution.
With respect to public utilities and services, the government should develop a reservation policy for admission to private educational institutions, for the allocation of space for housing and the supply of civic amenities to SC/STs. The reservation policy should be supplemented by equal opportunity legislation to provide legal protection against possible discrimination against SC/ST households.
Economic discrimination on the basis of race, religion, ethnicity, national or social origin exists in many nations under diverse social, economic and political systems. It is recognised that market discrimination against certain social groups creates adverse consequences for economic growth, income distribution and inter-group conflict. In order to correct the imbalances in access to fixed capital assets, employment and education between sub-groups in their populations, to improve the working of the market for better economic growth, and to reduce inter-group economic inequalities and thereby the potential for conflict, countries have resorted to various anti-discrimination policies. These policies mainly include reparation or compensation, fair or equal access policy in the form of affirmative action or reservation, preferential treatment and enactment of equal opportunities legislation. These policies have been justified and used by governments not only to secure equity but also to promote economic growth and development.
In the preceding discussion, we have argued that due to discrimination against the lower castes in various market and non-market exchanges, there is a need for an equal opportunity policy for the private sector to safeguard against discrimination in the present time and compensatory policies to make good the damage done due to denial of property and education rights in the past. It has to be recognised that the lower castes suffer from discrimination in multiple ways in various markets. Therefore, the reservation policy for the private sector should cover all markets, namely those for agricultural and non-agricultural land, capital, employment, input and products including private housing and educational institutions. It is necessary to enact equal opportunity legislation so as to provide legal safeguards against discrimination, and also to make provisions for reservation.
Sukhadeo Thorat is Chairman of the University Grants Commission, Government of India.
He is also Director of the Indian Institute of Dalit Studies and Professor of Economics
at Jawaharlal Nehru University. He lives in New Delhi