Is 49.5% of India poor

Written by Bibek Debroy | Updated: Apr 13 2008, 04:30am hrs
Here are some bulleted points. First, all reservations are inefficient. They impose additional constraints on decision-making, and more the constraints, less optimal the decision. Reservations for the public sector or small-scale industry are inefficient, as are those for women. Reservations anywhere for SCs/STs/OBCs are inefficient. Indeed, the caste system was inefficient because it reserved certain professions for those who had an accident of high birth. Had reservations not been inefficient, the world wouldnt have transited from monarchy to democracy. Lets not naively pretend there is no trade-off between merit/efficiency and reservations.

Second, there will be arguments that the ideal of efficient and unconstrained merit-based choice doesnt exist. Studies establish discrimination against SCs/STs in land and credit markets, based on caste alone. Or even in law enforcement. But do deviations from the ideal prove the ideal wrong Inner-party democracy is absent in many political parties. India is often the land of the rising son and daughter. Is that an argument in favour of scrapping democracy

Third, it is a myth that the basic structure of the Constitution cannot be changed. Its Preamble was changed to make India a socialist country. No political party can be registered unless it swears allegiance to the principles of socialism. The right to property no longer exists as a fundamental right. Schedules have been inserted to insulate some laws from judicial scrutiny. Arent these changes in the basic structure We no longer have the 1950 Constitution.

Fourth, every country accepts the inefficiency trade-off for reasons of equity. Call it positive affirmation if you will. But who do you subsidise through such trade-offs Clearly, the poor. We can debate NSS data. However, the percentage of population below the poverty line (BPL) is around 20%. If we have reservations of 49.5%, the implied deprivation ratio, something must be horribly wrong. This kind of figure might have had sanctity in the 1950s or 1960s,, but not today.

Fifth, poverty is an individual concept, not a collective caste-based one. There is no obvious correlation between caste and class. There are the poor among the general category, and there are the rich among SCs/STs/OBCsthe so-called creamy layer. Caste is one of our many identities, and not the most appropriate one for reservation. We may still applaud the Supreme Courts judgement, explicitly excluding the creamy layer. But pause for a moment. The court has only upheld the Constitutional validity of the legislation and no more.

Courts sometimes create the law. But in general, they only interpret it. Therefore, even if Supreme Court has upheld the policys validity, it hasnt said the policy is good. The forum for debating that is elsewhere. Also, it is by no means obvious that the Courts instructions on excluding the creamy layer are binding. Who decides the creamy layer The distinction between STs and OBCs is sometimes a historical legacy, the outcome of British whims. Some tribes got classifed as STs, others as OBCs. Therefore, what is the rationale for excluding the creamy layer for OBC reservations but retaining it for ST reservations

Sixth, logically, we should exclude the creamy layer for all reservations. But then, we need to define the cream, and there is no way to do that without bringing in class. This need not be income alone, and perhaps caste can also be thrown in, but only as one component. In other words, we need an index and identification based on that, before rushing headlong into reservations. Effectively, this will make reservations individual-based. With urbanisation and development, caste ceases to be a relevant construct, even if it is an important identity in rural areas. If we perceive the caste system to be detrimental, we shouldnt base public policy on caste and perpetuate it. Equity doesnt require us to view the world through a caste-based lens.

Seventh, take the IITs, which will be within the purview of reservations. Why dont we have more IITs Because there are supply-side constraints. Therefore, to retain the same number of general seats, if we now increase the number of IITs overnight and dilute entry requirements (the real hallmark of IITs), there is no getting away from dilution of quality. One has to be naive to believe otherwise. What, then, is the message That good students and faculty should head off overseas, or shift to private educational institutions in India

Eighth, we never ask the right question. Why do students with non-creamy backgrounds fail to obtain entry to better (excluding post-graduate) institutions like IITs Because of the failure of the government school system. Instead of rectifying that, we now want to mess up the government undergraduate system. The opinions of individual judges show that none of the core questions have been answered.

The judgement hasnt got us very far. As for the UPA and Arjun Singhs political cyncism, one doesnt know about Congress, but the country has moved back, not forward.

The author is an economist. These are his personal views