India has been in a phase of jobless growth for at least two decades now, coupled with rising poverty and discontent in rural areas. It is worth noting that India has not been able to develop a pattern of growth that produces jobs and inclusive development in the way most of the East Asian countries have done. Caste, which is mostly confined to politics, could be among the answers, a structural factor that impedes economic transformation in India.

Economic transformation and caste

• Academics frequently overlook the connection between caste in India and economic transformation.
• While caste is crucial to economic transformation itself, it also appears in current literature as a post-facto category for interpreting disparities in economic and social results.
• Caste through its rigid social control and networks facilitates economic mobility for some and erects barriers for others by mounting disadvantages on them.
• Caste also shapes the ownership pattern of land and capital and simultaneously regulates access to political, social, and economic capital too.

Barriers due to caste on the road to economic transformation

• There are three ways in which caste impedes the economic transformation in India:
  • Ownership and land inequality, are related to productivity failure within the farm sector.
  • Elite bias in higher education and historical neglect of mass education.
  • Caste-based entry barriers and exclusive networks in the modern sector.
• Arthur Lewis, a Nobel Prize winner for development economics, emphasized the accumulation of physical capital for economic transformation in the developing world.
• Theodore William Schultz underscored the need for human capital for a better transition to modern sectors.
  • For him, an educated workforce enhances productivity while entrepreneurship ability is increased through education, training, experience, and so on.
• Hence, the divergent outcomes in the structural transformation between countries in the global South, particularly India, China, and southeast Asia, are due to these three factors.
• All the nations which succeeded in achieving inclusive growth in the Global South had land reforms combined with human capital, invested in infrastructure by promoting capitalism from below, and began industrialization in the rural sector.
  • Only India lost on all three counts.

Land ownership and productivity

• India has some of the greatest land disparities in the world.
• Unequal distribution of land was perpetuated by British colonial intervention that legalized a traditional disparity.
• Due to British administrative methods, some castes were given land ownership at the expense of others.
• Caste is still a major factor in post-colonial Indian land ownership patterns due to the British incorporation of land governance categories and practices.
• They made an artificial distinction between proper cultivators who belong to certain castes and those laborers — lower caste subjects who cultivated granted/gifted lands (Panchami, etc.) that have institutionalized caste within the land revenue bureaucracy.
• The prescribed categories and practices have entrenched caste inequality in land ownership.
• Even the subsequent land reform that took place after India’s independence largely excluded Dalits and lower castes.
• It emboldened and empowered mainly intermediate castes at the expense of others in rural India.
• Even the Green Revolution that brought changes in the farm sector did not alter land inequality as it was mostly achieved through technological intervention.
  • Though India has certainly seen surplus food production since then, the castes that were associated with this land pattern and benefited from the Green Revolution tightened their social control over others in rural India.

Land Productivity after 1990

• While land has lost its productive capacity since the 1990s due to the real estate and construction turn in the Indian economy, it still works as a source of inheritance, family lineage, and speculative capital.
• In that sense, the economic reforms of the 1990s were a watershed moment.
• Even those who made a surplus in farm sectors could not transform their status from cultivators to capitalist entrepreneurs in the modern sectors, except for a few castes in western and southern India.
• Those castes that had a stake in agriculture did not benefit from the economic reforms for two reasons:
  • Historical neglect of education.
  • The entry barriers erected by the upper castes in modern sectors.
• The recent agitations by the Jats in Haryana and Punjab, the Marathas in Maharashtra, and the Patels in Gujarat, demanding, among other things, reservation for their castes in higher education and formal jobs exemplify this new trend.

Ignoring of Education in India

• Since the advent of colonialism, the elite has dominated the Indian educational system.
  • For their administrative purposes, British colonialists educated small groups of elites, primarily from upper castes.
• India suffered from caste bias in education.
• Although the Indian Constitution guaranteed free and compulsory education under its directive principles, it was hardly translated into practice.
• Instead, attention was given to higher education for the elites, and hence, inequality in access to education got translated into inequality in other economic domains including wage differentials in India.
• Indian elites sustained their position at the top by denying education to a substantial proportion of the population till positive-discrimination policies were implemented in higher education.
• India’s turn toward service growth — particularly its claims of emerging as a leader in software development and a natural inheritor of soft power — is arguably an outcome of this historic elite bias in education.

Global scenario

• Chinese and other East Asian countries invested in basic education and gradually shifted towards higher education.
• Their success in manufacturing is a direct outcome of the investment in human capital.
• In the global market, it can be seen easily that South East Asia and China captured low-end manufacturing jobs, and India largely concentrated on high-end technology jobs.
  • China taking over India in manufacturing is due to this neglect of human capital formation.
    • In China, rural entrepreneurship was able to grow out of the traditional agricultural sector on a massive scale.
    • Rural India, in contrast, hampered by a poor endowment of human capital, could not start entrepreneurial ventures even remotely on the scale of the Chinese.

Barrier to entrepreneurship

• India did not witness high capitalism from lower strata except in a few cases.
• Caste shaped policy outcomes, including India’s highly unequal land reform and lack of public provision of education and health, which in turn erected barriers to economic diversification.
• Caste also worked in building social networks.
• Castes that were already in control of trading and industrial spaces resisted the entry of others.
• Even those who had an economic surplus in farm sectors could not invest in non-farm modern sectors.
  • Social inequalities have mounted barriers to economic transition.
• Even the relative success in South India is being attributed to the ‘Vaishya vacuum’ — an absence of traditional merchant castes.
• In contrast, such a transition took place in South East Asia, where diversification into urban enterprises by agrarian capitalists was possible.

The interaction between caste and economy is one cause of truncated transformation. Because caste inhibits economic transition, it is an active agent rather than a residual variable. India should firmly take a step ahead for removing caste discrimination for a better economic future.