Opinion » Lead
November 28, 2011
The private sector's turn to deliver
Sukhadeo Thorat
A 2010 National Sample Survey exercise revealed that the percentage of
self-employed households among the Scheduled Castes was only 14 in
rural areas and 29 in urban areas. File photo
The Hindu A 2010 National Sample Survey exercise revealed that the
percentage of self-employed households among the Scheduled Castes was
only 14 in rural areas and 29 in urban areas. File photo
The government's decision to set aside a 20 per cent quota for SC/ST
vendors in its purchases, if accepted by every sector on a wider
scale, has the potential to makegrowth pro-poor and inclusive.
The Central government has finally announced a policy reserving 20 per
cent of its purchases for micro and small enterprises run by
entrepreneurs belonging to the Scheduled Castes and the Scheduled
Tribes. The new procurement policy will cover 358 items to be
purchased by Central ministries, departments and public sector
undertakings. The 20 per cent purchase norm will become mandatory
after three years. This is in line with the policies that have been
pursued for some time by Mukul Wasnik, Minister of Social Justice and
Empowerment; the final approval came from the Prime Minister's Office.
This is as historic a decision as the provision of reservation in
public employment, education and politics. Dr. B.R. Ambedkar first
argued for compensatory policies in the private sector, in a
representation to the Southbrough Committee on January 25, 1919. He
shared with the members of the committee the painful incident of an
'untouchable' Mahar woman who was taken to the police court for
selling watermelons, because she had violated the customary rules
which prohibited 'untouchables' from doing business: they were
supposed to undertake only the so-called polluting occupations. The
demand for policies to compensate the 'untouchables' for denial of
poverty rights was repeated in a memorandum submitted to the
Constituent Assembly in 1947: "Discrimination against citizens by the
private employers in the factories and in commercial concerns on the
grounds of race or creed or social status should be treated as an
offence," observed Dr. Ambedkar.
Although the situation has changed much since 1919, the consequences
of denial of property rights continue to haunt Dalits — which is
reflected in extremely low ownership of private enterprise by them. In
2010, a National Sample Survey exercise revealed that the percentage
of self-employed households among the Scheduled Castes was only 14 in
rural areas and 29 in urban areas, compared with 17 and 37 per cent
for higher castes. The economic census of private enterprises for 2005
showed a similar pattern. The share of the Scheduled Tribes, the
Scheduled Castes, the Other Backward Classes and the higher castes in
total private enterprises was about 2, 6, 30, and 61 per cent
respectively in the urban areas, while the figures were 6, 10, 40, and
45 per cent in the rural areas.
Thus, the graded inequality in the ownership of private enterprise
continues despite the grant of equal property rights: the share of the
Scheduled Castes and the Scheduled Tribes in total private enterprise
has remained much less than their share in the population. Besides,
the Scheduled Caste entrepreneurs and the businesses run by them have
faced discrimination in accessing some inputs and services, if not
all, that are necessary for the production and sale of goods and
services. This is particularly the case for communities such as
Valmikis, engaged in the sale of consumer goods such as milk,
vegetables and similar products, leading to market failure caused by
untouchability. It is in this background that the decision by the
United Progressive Alliance government to set aside a 20 per cent
quota in government purchases from SC/ST vendors assumes significance.
Limitations
The policy does have its limitations as procurement under the policy
will cover only purchases made by Central ministries, departments and
PSUs. Public enterprises account for only 5 per cent of the total
enterprises in India. The remaining 95 per cent, private enterprises,
are without any such obligation. The corporate sector has developed
affirmative action policies on a voluntary basis and adopted a code of
conduct; entrepreneurship development is one of the components of this
policy. Associations of industries have recognised the role of market
support for success in integrating marginalised communities in
mainstream industry. The code for affirmative action policy talks
about encouraging member-companies to make companies owned by those
from the SC and ST communities a part of their supply-vendor chain.
However, the policy of market support through partnership with those
from the SCs and the STs has not found favour with the companies. The
Confederation of Indian Industry (CII) reports that a beginning has
been made in this direction by only half-a-dozen companies. CII,
Assocham, and FICCI, whose membership runs into thousands of
companies, are way behind in accepting the market support policy in
purchases from SC and ST vendors. It is time the private sector, which
makes purchases worth millions of rupees each year, also accepted the
government's procurement policy in such a manner that a majority of
its member-companies are covered and join hands with the government in
a spirit of partnership.
The government's initiative on procurement, if accepted by the private
sector on a wider scale, has the potential to make growth pro-poor and
inclusive. A very high proportion of enterprises run by the SCs and
the STs are household-based, almost 80 per cent, much higher than the
corresponding figure of 61 per cent for higher castes. With low
capital and traditional techniques, earnings are low, and this results
in high levels of poverty among the self-employed and casual labour
engaged in them. In 2009-10, of the total rural Scheduled Caste
self-employed households, about 24 per cent were poor, the ratio being
15 per cent for higher castes. The ratio of poor for urban Scheduled
Caste self-employed households was 35, as against 20 per cent for
higher castes. The percentage of self-employed poor among the
Scheduled Tribes was more than 30 per cent. The pro-poor growth
requires that the productivity and earnings of these enterprises are
raised with necessary support from the government and the private
sector. Providing market support through reservation in purchases is
one way to transform this low-productivity and poverty-stricken sector
into a high-productivity sector and to make growth inclusive of the
poor.
But the goal of integration of the SC and ST businesses into the main
supply chains may be realised only if the private sector also follows
the government's policy in purchases for all member-companies. This
will make growth pro-poor and help reduce poverty among the
self-employed and the casual labour engaged in them.
Look East
The private sector can possibly do more. Instead of looking to the
West, it will be useful to draw lessons from the East, particularly an
experiment in Malaysia. The Malaysian government, through its
affirmative action policy launched in the 1970s, managed to increase
ownership in private enterprises for the discriminated group of Malaya
from only 2 per cent in 1970 to 20 per cent in 1990. The government
brought about a systematic redistribution of ownership of private
capital in favour of discriminated groups in a period of two decades.
We have the responsibility to repay the social debt the nation owes to
the 'untouchables' for having denied them property rights and left
them assetless for a pretty long period in history.
(Sukhadeo Thorat is Professor, Centre for the Study of Regional
Development, Jawaharlal Nehru University, Delhi, and Chairman, Indian
Council of Social Science Research. He is at
thoratsukhadeo@yahoo.co.in)
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