Caste and entrepreneurship in India

Dalit woman

The story of India's economic surge is dominated by two conflicting narratives.

The sceptics insist that growth has been largely jobless and deepened inequality in an already hierarchical society.

The optimistic refute this gloomy thesis and believe that the rising tide has lifted all boats.

As an example, they point to the emergence of a small but growing class of Dalit (formerly known as untouchables, the lowest in India's wretched caste hierarchy) millionaires.

So much so that Dalit activists like Chandra Bhan Prasad like to call it a "golden period" for Dalits where "material markers are replacing social markers".

Studies have also shown that the wage gap between Dalits and other castes have narrowed and their standing has improved. There is even a Dalit Indian Chamber of Commerce and Industry.

But new research by Lakshmi Iyer, Tarun Khanna and Ashustosh Varshney paints a less rosy picture.


Delving into the relationship between caste and entrepreneurship, the researchers have found that scheduled castes and tribes, the most disadvantaged groups in Hinduism's hierarchy, owned very little businesses despite a decade of sprightly economic growth and a long history of affirmative action.

Mining information thrown up by the 2005 economic census covering more than 42 million enterprises, they found schedule castes owned only 9.8% of all enterprises in India in 2005, well below their 16.4% share of the total population.

The scheduled tribes owned only 3.7% of non-farm enterprises despite being 7.7% of the population.

However, ownership of business among OBC's - an acronym for Other Backward Castes or the "middle castes" who "neither suffering the extreme social and economic discrimination of the Scheduled Castes, nor enjoying the social privileges of the upper castes" - has grown.

OBCs comprise 41% of India's people. Their members owned 43.5% of all enterprises in 2005, and accounted for 40% of non-farm employment.

This is a remarkable achievement considering that affirmative action for this group was widely introduced only in the 1990s.

The pattern of dismally low ownership of businesses among the most disadvantaged groups, the researchers found, is not specific to any one region or state in India.

Even in states like Kerala, Andhra Pradesh, Tamil Nadu and Maharashtra that were among the first to have social movements to end caste discrimination, ownership of enterprises is low.

States with high population of the disadvantaged groups also show that they are under-represented in ownership of businesses.

'Takes time'

The researchers say there could be a host of reasons - caste discrimination itself (members of other castes refuse to work with the lowest castes), lack of knowledge, illiteracy, and problems with securing finance.

"All these factors," they say, "can prevent scheduled castes from entering industries that have significant economies of scale."

Growth possibilities are limited by differences in the size of worker networks - scheduled caste owners find it easier to work with scheduled caste workers.

I asked Dr Varshney, who teaches at the US's Brown University, whether the findings really came as a surprise, given that deeper social changes in societies like India take a lot of time.

He said he wasn't.

"I should, however, add that the story of the rise of the Dalit millionaires is not small either. Though numerically insignificant, it is politically, economically and socially very significant," he told me.

Over time, he believes, the rise of Dalits "may well become comparable" to the rise of Nadars - a southern caste - in Tamil Nadu.

Until about 150 years ago Nadars - mostly "toddy tappers" - were condemned to a near untouchable status. Today, they are a leading business community in the state and are found in all classes.

I asked Dr Varshney whether increased representation in politics had anything to do with higher ownership of business for different caste groups? I cited the example of the increasingly influential OBC-led politics in the country.

"Whether that happens remains unclear. The correlation undoubtedly exists, but the causes are still to be sorted out," he said.

I also wondered why decades of affirmative action and more than two decades of economic liberalisation hadn't still unleashed entrepreneurial energies among the most disadvantaged.

"Such transformations can take a long time," he said. "The rise of the Nadars, for example, took nearly eight to 10 decades, depending on how one defines the rise."

Soutik Biswas Article written by Soutik Biswas Soutik Biswas Delhi correspondent

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  • rate this

    Comment number 11.

    More than the financial aid, the dalits need is social justice or equality with other castes. I understand this is a problem in some states in India, such problems are almost eliminated in southern states and this was not achieved by financial aids, but by social reforms. Every citizen and the govt should work together to realize this social reform throughout India.

  • rate this

    Comment number 10.

    Is India one of the biggest growing economy?-yes.
    Is India one of the leading brain centre of the world?-yes
    Is Delhi the rape capital of the world?-yes
    Will the caste system remain in India forever?-yes
    Will the gap between the rich elite and poor reduce in coming years?-probably not.
    It is a country of paradox with the world's best and worst.

  • rate this

    Comment number 9.

    'In 2005, scheduled castes owned only 9.8% of all enterprises in India in 2005, well below their 16.4% share of the total population.'

    Do we know what the % figure was in say 1995?

    If its improved significantly then the Dalits are catching up and this should reflect in the next census. If not, then the wealth is not dispersing.

  • rate this

    Comment number 8.

    In urban India there is no wage discrimination on the basis of caste. In modern Hinduism epidemic caste system is abandoned and and even minorities are enjoying reservations. In globalization and liberalisation all cry is for getting more and more concessions and facilities. Growth depends up on mindset. We are not discriminate nor take revange against who ruled and loot us like Mughals, British.

  • rate this

    Comment number 7.

    All the credits in raising caste based discrimination awareness in Tamil Nadu goes to Thanthai Periyar or E. V. R. He stared his campaign in the early 1930’s when almost everyone had some sort of superstitious beliefs. He campaigned hard for self-respect, equality and women’s rights right until his death.

  • rate this

    Comment number 6.

    A total lack of social empathy is at the core of such differences in India that fully exploited by the politicians. Entrepreneurship hurdles are not rooted in the caste rather in the Indian mindset itself. Failure in anything is considered a disaster. You only need to take a look at the social pressure at each stage: School, College, Job, Marriage. Ironically, that's one thing we are all united in

  • rate this

    Comment number 5.

    being disadvantaged means limited access to good education and opportunities for skills development and also lack of enterprnurial culture in the family as well as the social environments.
    Secondly those lucky ones from this group who get proper education give preference to a stable job(mostly Govt. jobs) over starting own business which in any case is a big hassle in India.

  • rate this

    Comment number 4.

    You have to wonder why British takeaways have not taken off in India.

  • rate this

    Comment number 3.

    Now that the results are skewered and has no clear pattern. I think Govt support programmes should concentrate on "economically underprivilaged" sections rather than classifying based on "social classes".
    It is only fair that people from all classes of society, if poor will be supported (including those who are traditionally from upper class yet economically weak)

  • rate this

    Comment number 2.

    A lot of Indians like to segregate themselves to a particular caste or region.The politicians also encourage that as they can create their own vote banks.I hope that with education this caste system gets extinct.

  • rate this

    Comment number 1.

    There is no "conflict" between the narratives: both are true (up to a point).

    Enormous economic progress has taken place in India, and some has benefited Dalits and OBCs.

    However, "one swallow does not a summer make": a few Dalit entrepreneurs (however successful) do not mean a sufficient or significant change in the overall situation for two-thirds of Indians who live on about US$1 a day.


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