Reservations: Let down by weak data

The Hindu Business Line Thursday, May 18, 2006

R. Vaidyanathan

The Government's move to introduce reservation in the private sector may have the lofty aim of enhancing social justice. But it is unfortunate that policy formulations with such far-reaching implications are to be based on such a meagre and suspect database, points out R. VAIDYANATHAN.

There is a move by the Government to introduce reservations in the private sector. This is to enhance social justice and social equity by facilitating increased and statutorily enforced participation of the socially and educationally disadvantaged sections in the private sector. This is considered all the more important in the context of the government's withdrawal from various economic activities. But the data available to formulate meaningful policies in this important area are "Pulled Out of Thin Air" what may be called `POTA' data. It is unfortunate that policy formulations with such far-reaching implications are to be based on such a meagre and suspect database. The data on the supply as well as on the demand side are neither reliable nor useful. 1931 may not reflect 2006 Many of us may not be aware that the Mandal formula of the 1980s, originally reserving 50 per cent of the seats in government service and educational institutions for Other Backward Castes, is based on the Census data of 1931. The Census process was affected by the World War in 1941, and from 1951 on caste, data are not collected (except that pertaining to Scheduled Castes and Tribes) as it was felt that these numbers may not further the aim of creating a casteless society. The assumption made by the Mandal Commission, based on the 1931 Census and other parameters that more than 50 per cent of the population belong to an OBC (Other Backward Caste) may not have been correct. But, on that assumption, the figure of 27 per cent of reservation for OBCs was arrived at.

The National Sample Survey 2003 Round suggests that the non-Muslim OBC number may be around 32 per cent of the population and not 50 per cent. Muslim OBCs are around 4 per cent. The National Family Health Statistics (NFHS) survey of 1998 suggests that the population of OBCs (non-Muslims) is around 30 per cent, closer to the NSS figures. Hence, the earlier assumption on the OBC population being around 50 per cent may be a substantial overestimation. In other words, we do not have a reliable Census headcount for the OBCs, except that made by State-level Backward Class Commissions, which are not really Census-like in nature. It may be useful to have a detailed caste-wise census to look at the actual numbers. Maybe this can be attempted at least in the coming Census. Organised and unorganised The discussion on reservations in the private sector presumably pertains to the organised or, more specifically, the corporate sector. Individual companies need not, and do not, provide data in their Annual Reports regarding the number of employees, leave alone caste-wise categorisation. But some aggregate data are available for the private organised sector. In manufacturing activities, an organised sector unit means a facility employing ten or more with power, or 20 or more without power and, in services, it is mainly the company form of organisations. The Table indicates the level of employment in the private organised sector. As of end-March 2003, there were 84 lakh people employed in the private organised sector. This is from a total work-force of around 40 crore. Hence, the policy of reservation will create a maximum of 20 lakh jobs if it is assumed that no SC/ST is employed in the private organised sector. This number is too small vis--vis the total demand. In the unorganised sector, legislated reservation will not help as not even the Minimum Wages Act can be enforced. Also, a substantial number of units are partnership/proprietorship firms, and legislation of this nature will increase rent-seeking. We should also recognise that a significant proportion of SC/ST people are self-employed. An economic Census of the Central Statistical Organisation in 1998 reveals that of 31 million enterprises nearly 12 per cent were owned by SC/STs and 33 per cent by OBCs. Hence, the assumption that weaker sections are only employees or employment seekers may not be correct.

Creamy layer exclusion The debate also does not take into account that backwardness is not a static phenomena but a dynamic one. As sociologist M. N. Srinivas said: "An important feature of social mobility in modern India is the manner in which the successful members of the backward castes work consistently for improving the economic and social condition of their caste fellows. This is due to the sense of identification with one's own caste, and also a realisation that caste mobility is essential for individual or familial mobility" (Collected Essays; pp196-197 OUP 2005). For instance, data pertaining to medical admission in Tamil Nadu, which has had reservations for decades, reveal that a substantial number of "open seats" are obtained by students nominally belonging to "backward communities". For instance, according to a report in The Hindu, in 2004, students belonging to the Backward Class (BC) or Most Backward Classes (MBC) took 952 of the 1,224 seats in 12 government medical colleges in the State (77.9 per cent). The first 14 ranks in the medical admissions went to BC/MBC students. Even in the open competition category, five Scheduled Caste candidates got into THE MBBS course this year. In Tamil Nadu, BCs get 30 per cent reservation in educational institutions, MBCs 20; SCs 18; and STs one per cent. The 1,224 medical seats then get divided into 354 for BCs; 247 for MBCs; 226 for SCs; and 13 for STs. The rest of the 384 seats are for open competition, where everyone competes, regardless of community. The final tally (the original list with 69 per cent reservation) released by the Directorate of Medical Education, however, shows that only 28 students from the `non-reserved' or Forward Caste (FC) got into government medical colleges, representing about 2.3 per cent. In fact, OF the top 400 rank-holders, only 31 are from a FC. In the top 100 rank-holders, only six are from an FC, 79 from a BC and 13 from an MBC (The Hindu dated 23-08-2004). Revise the groupings Unless continuous data collection and revision of the groupings are done, the reservation formulations may not achieve their desired objectives. Hence, keeping the caste situation static is not appropriate and there is a need to have a time-series data on the nature of mobility that is taking place across castes, both in employment and in business, particularly from the noncorporate to corporate business. Unfortunately, political parties are not interested in excluding any category, as was seen in the prolonged agitation by advanced Backward Castes after their exclusion for reservation by the Second Backward Class Commission in Karnataka based on its exhaustive survey. Many State governments have denied the existence of any creamy layer in their State. That is why the original SC/ST reservation in the 1950s was considered a moral issue and the present OBC quota a political matter.

The policy that "if there is a problem, then legislate" may not be appropriate, particularly when the database is weak and expectations are strong, particularly pertaining to votes. That is why the Supreme Court, as reported widely, while hearing a batch of petitions challenging the validity of the 77th, 82nd, 83rd and 85th amendments to the Constitution expanding the scope of job reservations, recently, asked the pertinent question: "Where is the data regarding the entry of OBCs in the open quota?" It is easier to stoke passions based on "POTA" data but much more difficult to douse them with facts since to be a statesman is far more complicated and time consuming than to be a politician. (The author is Professor of Finance, Indian Institute of Management, Bangalore, and can be contacted at vaidya@iimb.ernet.in. The views are personal and do not reflect that of his organisation.)