Indian economy in times of reservations

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Indian economy in times of reservations

Sunday, 27 January 2019 | Gautam Mukherjee

Indian economy in times of reservations

In a thriving democracy like ours, populist steps retard our forward momentum from time to time. But sometimes, they act as a corrective towards inclusion of those who might feel ignored or left behind. The recent 10 per cent economic reservation for the poor amongst the higher castes is not zero of zero, as the critics would have it; it has a solid intent

Would things have been better from the start to go in for economic weakness as the only basis for reservation without reference to caste or creed? We have had it in schools and housing societies in given States for a while, with the Economically Weaker Sections (EWS) reservations. On the face of it, it looks like a reasonable idea, but is probably better suited to a homogenised population with tiny minorities and distinct groups. Where the population speaks the same language and professes the same religion, for example.

India, by contrast, has always been a sub-continent and one size never did fit all. Caste-based reservations, in fact, predate Independence and both the British and some of the Princely States had reserved quotas for underprivileged castes and sections. But reservations, whatever their demerits, in all their complexity and political potency, are a ground reality that cannot be reversed now. Instead, they can, and are, being used as a device to increase capacity in order to give content to the percentages announced. This is what went awry in the years of socialist inadequacy. Today, there are resources to give the whole matter teeth.

So no, 10 per cent economic reservation for the poor amongst the higher castes is not zero of zero, as the critics would have it. It is a modest beginning, long in the gestation and put on the shelf for 10 years by the UPA. It is a law now, backed by almost all parties in Parliament and rapidly being implemented in the States. It has a solid intent to provide at least 10 per cent of all future opportunities in education and jobs to the economically disadvantaged amongst the upper castes as the economy grows.

The Other Backward Castes (OBCs), Scheduled Castes (SCs), the Tribes, have been addressed, at least in theory, multiple times over the past 70 years, starting in 1954 and picking up speed in the late Seventies. The Mandal Commission recommendations for the bottom of the pyramid excluding its “creamy layer” were implemented in the 1990s, despite upper caste protests. Reservations stand at near about the 50 per cent mark or more in some of the States under State legislation, despite a Supreme Court ruling to hold them at the halfway mark in the service of equity for the “general category,” meaning everyone else not covered.

But the back-office of primary, secondary and higher educational opportunities, still suffering from chronic shortages, are being addressed as well now, at last on an accelerated basis. New universities, medical colleges and so on are being established all over the country. After all, nobody can make a meal of percentages alone — they must represent seats and jobs, both in the public and private sectors, as well as in educational institutions and vocational training centres. If there are ample opportunities and seats to go around there is no shortage economy, and reservations become meaningless.

The greatest guarantee that this can succeed is by expanding the economy so that there is more money. This will automatically throw up new, often unregulated, opportunities. But hankering after permanent tenure Government jobs must go. In an era where technology is increasingly leading to automation and digitisation, the need for people is shrinking. Bureaucracy, therefore, will not employ or absorb very many of the millions of new job seekers in future. They will have to look at the ‘unorganised’, the small and medium sectors, as well as the formal private sector. These, given a benevolent capitalist system, will grow through entrepreneurship. In the medium term, they are expected to grow much bigger than the ailing PSUs. And, in all probability, pay much better as well. Permanent tenure, however, may have to go even in Government jobs.

Is there a positive momentum in the economy today? The answer is yes, and mainly due to the pent up demand from the restricted and licensed socialist years. It certainly needs a push and the untangling of knots as they appear by the political leadership, but the inherent demand exists. The foundations of the economy and higher education laid down in the early statist years have now taken on a life of their own.

China may be suffering from over-building today, but India has a lead of at least 30 years before its domestic demand scenario is slaked. China has already had 10 per cent plus growth for 30 years, starting from the Eighties, and is now looking outwards and abroad to keep its giant appetites, resources, and machinery occupied as best as it can.

Does this roadmap then essentially reduce reservations into a political football, particularly at election time?  Besides, look at the trend — if everyone has reserved seats, where is the room for protest, except, of course, for relative percentages and quotas within quotas? How are those people meant to survive who cannot secure the limited amount of private sector jobs or lack entrepreneurial skills? Well, a universal dole is on its way along with cash grants to farmers and interest free loans too. As is universal health insurance, already under implementation.

Will reservations themselves grow out-of-date too? Perhaps they are beginning to already. But certainly, when we become the second largest economy in the world after China on a PPP basis by 2030, reservations will make little sense. Having a purchase power parity greater than that of America, that followed up Civil War with the massive Civil Rights Movement of the 1960s towards its own form of setting things to rights and justice, is perhaps hard to imagine. But then, let us remember that India was once completely dependent on humanitarian aid to survive and feed itself. It has been some years since that it is no longer so.

Still it has been a long and winding road with a number of twists and turns. Illustrative allegories sometimes make it easier to sympathise with how it has been for us. There is an iconic coming-of-age film from 1967, just over 50 years ago, called The Graduate, in which a cougarish Mrs Robinson seduces a 21-year-old Benjamin, who has come home after finishing his undergraduate studies. Benjamin’s father and Mrs Robinson’s husband are partners in a prosperous law firm. The sexual conquest of the young college man by his experienced seducer should have set him on a path, presumably, of greater realism. Though like many young people, the lust he feels for Mrs Robinson does not dent his romanticism. He next falls for Mrs Robinson’s daughter, Elaine.

This sets off a tug-of-war between the mother and daughter with Benjamin as the beneficiary. And when Benjamin does turn decisive, it is only to rescue Elaine from the altar when she is about to marry another man, prompted by her mother.

A half a century on, the much-awarded movie seems more like a parable than urgent social commentary. The tug-of-war could well stand in for the fandango between capitalism with a human face, and socialism that is eternally confused but, like an old flame, exerts great emotional pull still.

The Graduate was bold stuff for mainstream cinema of the time, with its hint of student rebellion and fecklessness. Benjamin doesn’t have a one-night stand with Mrs Robinson. He turns the dalliance into a longish, surreptitious affair with many nights at a hotel. And then there is the need for validation, however clumsy, from the older woman. Nobody wins the laurel wreath for the moral high ground, and there is no redemption on offer. Unless, that is, Benjamin running off with Elaine in her bridal dress, grinning from the back seat of a bus in the final scene, is it.

The seduction of Fabian Socialism with Soviet overtones was the siren call of the early years. This was the Mrs Robinson of our economic vision, looking for post-colonial validation. It left the nation (read Benjamin) yearning for equality and justice. It provoked caste-based affirmative action, without the Viagra and wherewithal to fulfill such desires. Growth rates were truly paltry, at no more than 2 per cent. The whole caboodle couldn’t sustain itself, massive five-year Soviet style plans notwithstanding.

Of course, Socialism, even Communism was the fashionable ‘ism’ of the Forties, probably in reaction against imperial and colonial exploitation that this country and others just emerging into independence experienced. The burning zeal in leaders like Jawaharlal Nehru, and later his daughter, Indira Gandhi — who both ruled for lengths of time in our formative years — was to re-engineer economics to suit notions of social and economic equality.

Unfortunately, they did not pay much attention to the income side of the ledger, even expecting it to take care of itself with deficit financing. But international credit ratings were invariably low. India was looked at as a poverty stricken third-world country with potential, but masses of intractable problems to overcome first. Borrowed money, therefore, was not easy to come by, not even from the multilateral lending agencies, such as the World Bank or the IMF, and came almost always, when it did, tied up in multiple strings. The cavalry to the rescue in the early years, and to an extent even now, was/is the Soviet Union/Russia. It was and is keen on exercising its hegemony over a strategically placed country in South Asia. So the USSR and Russia as its successor negotiated barter deals, deferred payments, and traded with us in rupees and roubles as opposed to US dollars. Iran, in difficulties with the US sanctions today, sells us oil in rupees as well.

Socialism implicitly and explicitly abhors notions of profit and prescribes redistribution of wealth, without however, addressing how to hold up the central pole of the circus tent. So, in effect, it snatched away the assets and privileges of the rich and economically viable, without any knowledge about how to make and keep them productive. This ended up killing the golden goose. And Nehruvian socialism only managed to redistribute degrees of poverty. Elsewhere, Communism collapsed altogether, to be replaced by a state-run capitalist system or an oligarchy with all its inequities accepted.

Britain, Nehru’s early model for Fabian Socialism derived from it, has not only declined steadily over the years since WWII, but is now on the point of disintegration as a consequence of its ill thought out backlash with Brexit.

To compound issues, the programme of caste-based quotas in India, particularly by reserving quantities of Government jobs, in the absence of much of a private sector, created further strains for the economy. The idea was to uplift the most downtrodden in a highly pluralistic society. Over the years, the sub-castes wanted their pound of flesh, and so did the religions, and the sects within them. India, the sub-continent, also contains many languages. That they too were clamouring for distinctions and advantaged assistance is another story. One that led to a number of new States being formed to give vent to linguistic, cultural, and sometimes religious aspirations.

This, in turn, gave birth to — prematurely and probably without meaning — both vote-bank politics and pseudo-secularism. And probably, in a round-about way, to the rise of Hindu nationalism that has grown into the chief alternative in national and State politics. But for the young Benjamin that India was, when it graduated into Independence, it would undoubtedly have been much better, we can see in hindsight, to have pursued strategies of high economic growth under the banner of a benevolent capitalism.

A getting it on with Elaine and a happily ever after perhaps. That might indeed have brought forward the high growth rates from the mid-Eighties. The economy, which was only truly unshackled in 1991, still took some years to shake off its chains. What if it had received a no-nonsense boost in 1947 itself? For a Left-wing Nehru languishing in British jails for long years even as the arch capitalist princely classes colluded with the British, it was a course he probably wasn’t even willing to consider.

With the model being American “individualism” and its risks of boom and bust, would we have forged ahead without excessive state interference?

As a free market, Indian ingenuity and initiative, much appreciated today around the world, would have flowered. We may well have become the powerhouse of Asia, given our superior geography and natural resources in comparison to China.

If only the early Indian Governments had stuck to securing our best interests amongst the comity of nations instead of trying to change the world order to suit the have-nots. It might have been the hard-nosed Patel what-if, instead of the Gandhi-Nehru rose-tinted what is.

But this is going into the realm of what might have been then, and might be again, given the proclivities and the gradual coming of age advantages this nation enjoys in 2019. An economy on the way to becoming a

$5 trillion one before long, has many options, and reservations are the least of them.

As we have grown more populous, we also seem to have become more prosperous. We were a very poor and ravaged country at Independence, with a population of some 350 million people, with low life expectancies to boot. Today, we are more than 1.3 billion strong, enjoy food surpluses, and have recently doubled our per capita income. This is alongside being the fastest growing major economy in the world with an average growth of 7.3 per cent in GDP per annum. Our life expectancy — despite massive challenges yet in health, sanitation, and environmental issues — has more than caught up with that of developed nations.

Of course, in a successful and thriving democracy such as India, there may be populist steps taken that will retard our forward momentum from time to time. This even acts as a corrective towards the inclusion of those who might feel ignored or left behind. Our socialist past cannot be expected to exit the stage without a few attempts to survive after all. But, overall, the inexorable logic of greater prosperity is a human desire to consolidate it and prepare for further growth. There is, therefore, no reason to fear that Benjamin will refuse to grow up and secure his own pot of gold.

The writer is an entrepreneur and former corporate executive

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