Employment Equity in India’s Private Sector

The single largest variable that predicts SAT scores is family income. If you want higher SAT scores, you need to get your kids born into wealthier families. You know, it’s great to tell kids to pull themselves up by their own boot straps, but you better

put boots on them first. -Paul Houston


The minimum common program enunciated by the United Progressive Alliance was a multi-purpose document, partly to guide the new government and partly to assuage the sentiments of the constituents of the disparate elements that made up the alliance. One of the items in that document related to the extension of the caste-based reservation system of the public sector to the private sector. The item caused only a minor initial alarm in the corporate world which thought that this was merely a sop to the leftist parties and which would never go beyond innocuous statements. Since then, the two main protagonists of economic reforms in the government, the finance minister Chidambram and Prime Minister Manmohan Singh have reiterated the intent of the government, and that too before august gatherings of the big-wigs of the corporate world. This has caused a noticeable consternation in the industry and among the Indian elite in general.

There are no known statistics on the caste-composition of the work-force in the private sector. There is, in fact, no reason to believe that upper caste workers dominate in the blue-collar occupations. It is indeed a well-known fact that when the industrialization process started in India, workers were recruited on the basis of their caste affiliations, such as the weaver caste being given preference in the textile mills. Therefore, it is reasonable to assume that the debate is about the white collar jobs in general and managerial positions in particular. And here, the upper-caste domination is apparent even without the availability of proper statistics. All one has to do is to look at the last names of the managers, lawyers, journalists in the news and business media and see that most of the names belong to the Brahmin, Kaysthas, Khatris and other upper castes, with a sprinkling of Jaat and Muslim names; Dalit and other backward caste (OBC) names are conspicuous by their absence. It is thus clear that the managerial and professional class in India’s private sector is not representative of the whole society.

Is this the right time to redress the unrepresentative character of the private sector? The take-off of the Indian economy is still in an initial stage. Substantial progress has been made in selected sectors, such as information technology, pharmaceuticals, automobiles and telecommunications to make them internationally competitive. But the take-off is still fragile enough that any steps which might jeopardize this progress should be resisted. Indian companies have undertaken significant steps, often involving painful restructuring, to become competitive in the global marketplace and have even started taking some baby-steps towards becoming global players. It has been argued that this hard-won efficiency would be at risk if the private sector is subjected to the same caste-based quotas which are now applicable to the public sector. The efficiency of the private sector is crucially dependent, it is argued, on its ability to hire the best person for the job regardless of a person’s religion, caste or gender. If this freedom of the private sector is restricted, it will make it difficult, it is said, for the firms to compete with the rest of the world.

Assertions of this type rest on some simple-minded assumptions. They assume, for instance, that the current system of recruitment is indeed based on merit and merit alone. Anyone familiar with the private sector in India knows that this is not the case. Nepotism and access to network, known as “approach” in India, play a very important role in the job selection process. Merit plays a secondary, if any, role in most cases. A large number of jobs may never get advertised and may be filled simply by the relatives and friends of those already working in a company. The system, therefore, benefits the current upper-caste hierarchy of the private sector. Recruitment based on merit and merit alone will open the way for the underprivileged sections of the society to some extent, but this will not be enough.

Another big barrier is the qualification “inflation” for most jobs. Large companies routinely fix arbitrary educational qualifications for jobs as a screening device, even when educational degrees are not required. To the extent that upper caste applicants tend to have higher degrees, they get preference over the lower-caste applicants with lower educational standards. Many of these jobs require plain communication and inter-personal skills for which a higher degree or higher marks are not always the best criteria. It has been pointed out that the Pakistani army actually screens out persons with high IQs for its officer cadre. Other armies presumably use similar techniques. This is an acknowledgement of the fact that a higher IQ is not the best criterion for all jobs and that an Einstein would not necessarily make a better commanding officer than a Patten or a Rommel.

It would appear from the above that I am making a case for extending the caste-based quota system to the private sector. While I am indeed in favour of introducing greater employment equity, I believe that there is a better alternative to the government enforced quotas. The following is a blueprint of my suggested approach:

-The plan should be restricted to large firms, say, with an employee base of 1000 or more persons.

- It should be restricted to certain professional and managerial positions where the lower castes and minorities are significantly under-represented.

- The employer organizations in the country should be asked to acknowledge the need for employment equity in the private sector and make a commitment towards achieving it.

- Large firms should be asked to undertake an annual survey of the caste composition of their employees in the selected occupations.

- They should be asked to review their job qualifications and recruitment procedures to examine if these contain any systemic barriers to certain sections of the society and to take steps to remove such barriers;

- The firms should be asked to set targets for themselves for improving the presence of the under-represented sections of employees in their workforce;

- An agency should be set up to monitor the progress of these firms. This agency should consist of the representatives of employer organizations, such as FICCI and CII and of dalit and minority organizations. The government should not get directly involved in this process;

- The firms should send reports of their annual surveys to this monitoring agency. The agency should set a system of rewards for progress and penalties for non-performance, taking into consideration the social and economic factors peculiar to the firm, the industry and the geographic area in which it operates.

The government’s role should be one of the facilitator in this process. The involvement of the employers’ organizations will ensure a level playing field for all firms. It will also avoid the creation of another bureaucratic institution with all the potential of added costs, corruption and inefficiencies that such an institution could bring with it. The employer organizations may be reluctant at first to assume such a function but they will prefer this to the alternative of the government enforced rigid quotas.

If the above approach is adopted, it will gradually lead to a more representative workforce in the private sector, without engendering the bitterness and antagonisms, let alone the inefficiencies, that are a necessary feature of a rigid quota system. The replacement of the traditional recruitment methods with more formal methods and the elimination of the "discrimination-penalty" might even lead to greater efficiencies.