The latest chapter of the Indian reservation saga involves the Department of Industrial Policy and Promotion (DIPP), under the Union commerce and industry minister Anand Sharma, telling the corporate sector that companies benefiting from various government incentives may be asked to reserve about 5% of employment needs for the SCs and STs. This development has to be seen in continuity with the common minimum programme announced by UPA-1, wherein ?a national dialogue with all political parties, industry and other organisations? was promised to figure out how affirmative action should be handled. Even at that time, the industry chambers?the Confederation of Indian Industry, the Federation of Indian Chambers of Commerce and Industry and the Associated Chambers of Commerce?expressed scepticism about quota legislation. And the pattern is being repeated in the present moment, where the chambers are once again arguing that reservations in the private sector will adversely affect merit and efficiency. Overall, this argument goes, India?s comparative advantage will take a hit if reservations become de rigueur. We must note that the objecting parties are not against affirmative action per se. The question is whether transmission losses between theory and practice are worth the gains. There is evidence suggesting that such gains will not really outweigh the pains.
Given India?s demographic prospects and growth ambitions, we know that that urbanisation, development and skills enhancement are going to have explosive significance. We also know that these prospects and ambitions are being addressed via public policy. But public policy must consider the efficiency principle as seriously as it likes to address the equity principle. Evidence from a range of sources points to the inefficiency of reservations from education to the labour markets. It isn?t just about standards being lowered. There is the issue of creamy layer cornering all available benefits, and then there is the question of whether the resulting ghettoisation is actually a desirable goal for a modernising nation. Does it merely reinforce caste categories instead of mitigating them? Should the government not focus on addressing the inequalities in opportunity that arise out of a moribund education system, at primary, secondary and tertiary levels? The problem of differential access to education and skills cuts across caste barriers. Reforming that system is a lot harder than attempting populist gimmicks like job reservations. Overall, the proposal for caste-based reservation in the private sector appears extremely suspect.