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Caste as Economic Organization Does it Promote Growth and Fair Economic Outcomes? By Professor Emeritus Jawaharlal Nehru University ,Delhi Sukhadeo Thorat 1 1 Purpose : Three Issues • What is the Economics of Caste System • Does caste promote growth, Efficiency and fair income Distribution? • What is the contemporary Empirical Evidence on • Economic Discrimination –Market and non market • Impact on growth, inequalities and poverty • Neither promote growth, nor fair Distribution of Income • Hamper economic growth and create inequities and poverty • Rest of presentation provide reasons for this position 2 2 Economic Features Theoretical discussion is based on original Text of Manu Smriti . Ambedkar put 185 BC,( about 2200 years ago) for composition of MANU SMRITI and 400 AD for Untouchabilty ( about 1615 years ago ) • Caste as operative customary law ,continued till early 18th century when property rights were opened up selectively during British Period . • Both caste and untouchability is now legally ban after Indian Constitution in 1950. • But caste persists as a legacy of past in many forms and spheres ,Hence we are concern about it .It is not3 3 Economic Feature of CS CS involve division of Hindus into five social groups called caste, namely Brahman , • Five castes separated and isolated through code of endogamy -marriage with in caste . • Occupations (or property rights) of each caste fixed by birth, without freedom to change. 4 4 Economic features cont--• Allocation of occupation (or property rights) among castes is, graded and unequal To the Brahmins, assigned teaching, performing religious sacrifices and rituals , and receiving gift; to Kshatriya to protect the people, to Vaishya,the trade , to shudra , animal husbandry and agriculture and to ati –shudra or untouchables the service to all castes above them. 5 5 Economic features of CS Cont-• Education :three castes namely Brahmin, kashtriya , and vaishya had right to education, but Brahmin alone can teach and use knowledge as profession , two castes, that is kashtiya and Vaisha had right to education,without right to teach . The Shudra and untouchables did not have right to education .( This feature was application to all women irrespective of castes) . 6 6 Economic of CS cont-• Social mechanism of Excommunication, social and economic boycott for deviation from caste codes. • Hindu social philosophy- moral and ethic justify caste system ,it has divine origin. • Property rights and Economic Relations are consecrated by religion and made sacred, eternal, and inviolate”. Ambedkar 7 7 Consequences on Efficiency and Growth • Un-free Economic order -but based on restrictions. • Restrictions on occupation outside caste, • Restriction on labor employment • Restrictions on formal education. • Restriction on Social and civil rights 8 8 Consequences on Growth Cont-• • • • • Restrictions results in to negative Impact Akerlof,Scoveli, Lal ,Ambedkar ( a) Inefficient use of capital and labor , (b) Disincentive for work efficiency and ( c) Limited scope for creation of scientific knowledge and technology . 9 9 Consequences on Growth Cont-Caste creates segmented and imperfect markets in capital and labor and bring immobility and imperfection in markets • Capital and labor failed to move from low return occupations to high return occupation • Imperfect and segmented markets bring inefficiency , and equilibrium with less than optimum outcomes, 10 10 Consequences on Growth Cont• Induced involuntary unemployment for low caste and voluntary unemployment for high caste and result in under use of labor resources . • Efficiency of labor suffers as occupations not based on individual choice, and preference and training or capacities, task assigned in advance, selected on the caste status of parents. 11 11 Consequences on Growth Cont• Efficiency affected as some occupation impure and polluting, with low status for persons engaged in them. • derive no job satisfactions. In fact, constantly provoke people engaged in them to aversion, ill will, and desire to evade, • Disassociates intelligence from work and with contempt for physical labor affects incentive to work 12 12 Consequences on Growth Conti• Reduced supply of quality human resource due to restrictions on education • Formal education only for study of Vedas in schools. No schools for arts and sciences, which producers ,merchants and artisan need • Did not enhance scientific knowledge and technologies needed for higher productivity. 13 13 Consequences on Inequalities • Occupation or property right being unequal, produce inequality • in assets ownership , • employment and • education • Create graded Inequalities 14 14 Empirical Evidence on Economic Discrimination • Indian constitution does not recognized distinctions of caste. Also Enacted legal safeguard against discrimination. Two Antidiscrimination laws ,1955 and 1989 , modified in 2015 .Affirmative Action Policies • Dalit acquired access to prohibited economic spheres ,Owned some assets , (agriculture land , nonfarm enterprise ) ,salaried employment and education. 15 15 Estimate of Impact on Growth : • Discrimination persists in some, if not all economic spheres , continued as legacy of past in markets and nonmarket Exchange Faced by Dalit producers /businesses in access to inputs and sale of outputs in markets • Discrimination in non market institutions ( Education, Health and food) and government programs ( related food , nutrition, health , public employment ) 16 16 Estimate of Impact Farm Income Farmers survey 2003 , 36 % of observed differences in net income between SC and higher caste farmers and 64 percent of differences between SC and Other backward caste are accounted by discrimination • For same data caste inequality account for about 3 to 17 percent of overall net farm income inequality . Discrimination results in income loss to Dalit farmers . (Ashish Singh) 17 17 Estimate for Non farm sector Discrimination assume forms: entry treated with contempt and hostility, unable to rent or buy physical space , locating shop own caste locality ,purchases mainly by own caste consumers, in hiring ( high caste ) labour , in initial order for business, sale of goods at lower price ,threat to invoke the caste identity , difficulties in credit and not having access to social net ( caste ) work .( 2003 , and 2015) . 18 18 Estimate for Employment cont-Discrimination account 41 percent in 2005 and 24 percent differential in wage differential between SC and forward caste in public sector in private sector in 2012 , at over all level . Discrimination accounts for a large part of the earning differences in regular salaried in urban are , with job discrimination being more important than wage discrimination .( Madheswaran 2015) . Call back discriminatory 19 19 Estimate for overall Income cont-• Vani Borooah for 1994 and 2005 observed that in 1994 , at least one-third of the average income difference between high caste Hindu and SC/ST households was due to the “unequal treatment” of SC/ST attributes ( discrimination). Ten year later in 2005 ,significant inter-group disparities in achievement in income and in poverty attribute to social exclusion 20 21 Consequences on Inequality • Assets : In 2012 ,in rural area only 22 of Sc were self employed farmers as against 45 per cent for higher caste and 42 percent for OBC , About 14 per cent SC households operate enterprises /business compared with 19 percent for higher castes .In urban area % was 31 for SC and 41 higher caste. In 2005 SC share’s in total enterprises in the country was only 10 per cent,compared with 42 for higher caste . 21 22 Inequality contin--• Wage labor account 55 % for SC compared with 22 per cent for higher caste in rural area , and 22 per cent for SC and 7 per cent for higher caste in urban area , in 2012 • Higher Education Enrolment rate in 2008,average being 17 percent, but 12 % for SC ,and 27 % for higher caste . • In 2012 unemployment rate 7 % for SC and 5 % for higher caste . 22 23 Inequality continue :Income and Poverty • In 2012 MPCE, all India average , Rs. 1646 , with Rs. 2239 for the higher castes, followed by Rs. 1518 for the Other Backward Caste, Rs. 1297 for the Scheduled Castes , and Rs. 1123 for the Scheduled Tribes (STs). • Poverty 12.4 % higher castes, 25% OBCs, 30 % SC and 43 % SC , all-India average being 23%. per cent. • Graded Inequality in income and poverty 23 24 Final Comments • Caste Economics hamper economic growth and create inequalities and high poverty and low human development for dalit and similar groups, it remains inefficient institutions . • Therefore need policies to provide legal safeguards against market discriminations and affirmative action policies for providing equal access are evitable to promote growth and reduce poverty in private sector 24 Thank You 25