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 31.

    LLH: What is wrong in having caste system in India. Theymarry among their own caste because they know each other in castecommunity.Popln of each caste will have million of people. There will be less divorce,problemsetc because they know their culture and solve among relatives.THINK IT IS A TYPE OF RACE andYOU WILL KNOW THE ANSWER.

  • rate this

    Comment number 30.

    @MOP and Nicky. You sound like something from a long gone and not much missed era. People aren't 'classified' by the colour of their skin in the uk, nor do relationships between people of different colour skin raise eyebrows. Why should they?
    It seems, typically for these forums, that you prefer to invent things to criticise elsewhere in the world than face up to your own country's problems.

  • rate this

    Comment number 29.

    Mr Biswas do u mind explaining every1 what in reality is the caste system in Hinduism and how is it implemented in reality in India as these are 2 different things. I hope u are aware of it.

  • rate this

    Comment number 28.

    MOP 23&24: I'm a white Christian American girl dating a Hindu Indian guy. I also know quite a few people who are in interracial relationships, though that shouldn't have to be said.It's embarrassing that you think that's not possible.In any case, issues of religion and race are poor defenses of the caste system. It's really not viewed as very moral/ethical to be ethnocentric & racist anymore, FYI.

  • rate this

    Comment number 27.

    Ok, religion based categorisation of people exist in India. I agree.
    What would you call, then, the classification of people based on colour in the so called progressed country: UK? why do you want to classify countries as "first world countries", "third world countries"? Please, any so called educated person from UK may answer..

  • rate this

    Comment number 26.

    "...schedule castes owned only 9.8% of all enterprises... well below their 16.4% share of the total population...scheduled tribes owned only 3.7% ... despite being 7.7% of the population."

    How does this compare to the ones on the top as a percentage of population - the brahmins? Significantly higher or significantly lower? How about other socio-religious groups in casteless societies?

  • rate this

    Comment number 25.

    well said..
    Good that you mentioned about Dr. Ambedkar.

  • rate this

    Comment number 24.

    We have Hindu, Christian, muslim religions etc. If we have a religion in our system why not we can have a caste system. If you marry a boy/girl in the same caste, you will mingle very easily culturally, food habits and behaviour etc. For example Hindu and Christian marriage will not work always because one religion will dominate.This is the fact. The siblings will have tough time.

  • rate this

    Comment number 23.

    What is the difference between Class system (UK) and Caste system. Will white man/girl marry a blackman/girl ? If no, then caste system is also justifiable.

  • rate this

    Comment number 22.

    @20 MOP Those class system was recently created by BBC and it really doesn't achieve anything.

  • rate this

    Comment number 21.

    That is true, but we do have social mobility in the UK. The poorest have a much tougher fight on their hands to reach the elite than the middle class do, but it is still very possible.

    In India, you cannot escape the caste you were born into. Individual merit is meaningless. You're condemned to a predetermined status that severely limits your ability to contribute to social development.

  • rate this

    Comment number 20.

    In UK, there are SEVEN CLASS 1.Elite, 2.EstablishedMid Class 3.Technical Mid Class 4.New Affluent Workers 5.Emergent Service Workers 6.Traditional Working 7.Precariat.
    Instead of class, we have a caste system in India based upon the world we do in those days. Precariat and Lower caste are belong to the same category. Both will not be invited to a Queen's party or share the same table.

  • rate this

    Comment number 19.

    We discussed caste few times before in this BBC forum-e.g. "Caste census: Opening a Pandora's box?"-

    It's really surprising that many, so-called "educated' (even research professionals) believe in the nonsense of caste, many in the name of religion- So pathetic.

    More pathetic part is- the disease is equally, if not more, present among 'lower' caste too.

  • rate this

    Comment number 18.

    If India, as a country, is interested to develop innovative, knowledge based industries (we routinely hear such rhetoric) then it must enforce decent corporate governance and actively address the issue of all pervasive & socially accepted culture of corruption.

    That would help new entrepreneurs beyond tradition businessman communities/families (irrespective of caste), who are abundant there.

  • rate this

    Comment number 17.

    Caste has been and will always be a distinguishing factor in India, just as there are class distinctions in every society across the world. However, the economic status has now become more of a distinguishing factor. Plenty of upper class families have slipped down the economic level for reasons that have nothing to do with caste.

  • rate this

    Comment number 16.

    Caste system is a blot on both humanity & Hinduism. At the same time we need to remember that rise of caste politics is basically a politics of revenge, hunger for power than enforcing social justice & equality. Many, if not all, dalits are no less oppressive to lower or dalit-er caste/community.

    Rise in wealth via business or otherwise (caste irrelevant) is proportional to political empowerment.

  • rate this

    Comment number 15.

    almost 60% reservation for dalits in india in education etc.Dalit success mayawati,suresh kalmadi et.People forget babasaheb ambedkar who was the chairman of commitee who wrote the constitution of india was a dalit.caste system will never disappear in india as its in the religion.even ramayan has it.india will have to abandon hinduism to abandon caste system but things are not bad as bbc projects

  • rate this

    Comment number 14.

    As many people hear said, dismantle caste system in schools, houses, Jobs, Lands ......If any concession has to be provided, provide it on the persons economoic status and not on his caste.

  • rate this

    Comment number 13.

    India has huge potential, but as long as the caste system remains it will always be held back. Her future depends on dismantling it.

    It was liberty and equality (at least relatively for those times) that enabled Britain to become the first industrialized country and the dominant empire. It is those same principals that allowed America to rise in our place, beat the Soviets and win the space race.

  • rate this

    Comment number 12.

    Media celebrates India as world’s most populous democracy i.e. capitalist success. Reality: India is wracked with unrest. Unrest sprouts largely from colonial subjugation: the partition of British India into a Muslim Pakistan & predominantly Hindu India = communal violence.
    I have often wondered: What would happen if this geo-political, artificial, western-serving "division" was set aright?


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