The role of caste in economic transformation

News: Recently, India witnessed agitations against farm laws, agitation for reservation by agriculture castes, and is witnessing an ongoing protest against the Agnipath programme, at present.

What are the reasons for such protest?

They are all arguably an outcome simmering discontent due to jobless economic growth for at least two decades, coupled with rising poverty and discontent in rural areas.

How does it impede the economic transformation in India?

As per Arthur Lewis, a Nobel Prize winner for development economics, accumulation of physical capital is vital for economic transformation in the developing world. Further, Theodore William Schultz, emphasized that human capital in the form of educated workforce and entrepreneurs, is vital for better transition to modern sectors.

There were divergent outcomes in structural transformation between countries in the Global South, particularly India, China and South East Asia. It was because all the nations which attained inclusive growth in the Global South succeeded in land reforms, human capital formation, investment in infrastructure through capitalism and began industrialisation in the rural sector.

However, only India lost the game. It has been due to three factors which impeded Inclusive growth in India:

(1) The caste system shapes the ownership pattern of land and capital. It has led to ownership and land inequality.

(a) India has one of the highest land inequalities in the world today. It started under British rule. They assigned land ownership to proper cultivators who belong to certain castes at the expense of others/labourers belonging to lower castes who cultivate granted/gifted lands. It is still reflected in the post-independent land ownership pattern in India because Dalits and lower castes remained excluded in the post-independent land reforms.

Since Economic reforms of 1991, the farm lobby has lost its power. The land has lost its productive capacity.

The farm cultivators could not transform into the capitalist entrepreneurs in the modern sectors, except a few castes in western and southern India.

(2) There is an elite bias in higher education. Further, it is found that there is a historical neglect of mass education

The Indian education system has been suffering from an elite bias since colonial times. These elite were largely from upper castes. This has continued in the post-independent India. The service growth since 1991 reforms is an outcome of this historic elite bias in education.

India did not achieve much success in human capital formation which was required for the manufacturing growth. In contrast, Chinese and other East Asian Countries invested in basic education and gradually shifted towards higher education.

Therefore, they accumulated human capital which contributed to their success in manufacturing. Unlike India which concentrated in high-end technology jobs, these countries captured low-end manufacturing jobs.

(3) Caste system generated a barrier to entrepreneurship. It was done through its rigid social control and networks which facilitated economic mobility for some and erects barriers for others in the modern sector.

The relative success in South India is being attributed to the ‘Vaishya vacuum’ or an absence of traditional merchant castes.

In contrast, agrarian capitalists entered into urban enterprises in the South East Asian Countries.

What were the reasons due to which the agriculture sector could not benefit from the economic reforms?

Due to historical neglect of education and the entry barriers erected by the upper castes in modern sectors. It is validated by the recent agitations by the Jats, the Marathas and the Patels, demanding reservation for their castes in higher education and formal jobs.

Source: The post is based on an article “The role of caste in economic transformation” published in the “The Hindu” on 23^rd June 2022.