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  1. Why Ease of Doing Business is better for SC/ST entrepreneurs than purchase reservations

Why Ease of Doing Business is better for SC/ST entrepreneurs than purchase reservations

SC/ST entrepreneurs would benefit if DoingBusiness easier.

By: | Published: October 4, 2018 1:34 AM
Reservations, reforms, Chamber of Commerce and Industry, Milind Kamble, SC/ST entrepreneurs In this view of the world, if Dalit entrepreneurs can succeed in creating wealth, this will serve as inspiration to millions of others.

Milind Kamble, chairman of the Dalit Indian Chamber of Commerce and Industry, makes a catchy point when he says, as he did in an Express Group Idea Exchange interaction, that “capital can break caste system … market and money will defeat anti-capital Marx and Manu”. In this view of the world, if Dalit entrepreneurs can succeed in creating wealth, this will serve as inspiration to millions of others. Getting there, however, is easier said than done.

At Kamble’s suggestion, when the government tried to ensure a market for MSMEs by reserving a fifth of all purchases of PSUs and ministries for them, a certain portion was reserved for SC/ST entrepreneurs. At 4% of the total spending of around Rs 6 lakh crore, this means government departments and PSUs have to buy Rs 24,000 crore of goods and services from SC/ST enterprises every year. There is no price preference, the enterprises have to agree to match the lowest bidder (L1, in jargon) and, if their quality is up to the mark, they will get the order, subject to the 4% cap.

Last year, however, just Rs 550 crore of goods and services were bought, though Kamble is happy because this is an increase over what was bought earlier. Increasing this in a meaningful manner, however, will take time since getting SC/ST enterprises to an adequate level of quality can often mean completely reorienting their business practices and even entail large investments which, often, they cannot make. Kamble blames the lack of capital as a consequence of casteist bank managers, but that may not be the only reason.

Millions of poor youth, with no family history of business or sufficient collateral—most banking, like it or not, is collateral-based—find it difficult to raise bank loans, so scaling up businesses is not easy irrespective of caste background. This is compounded by the huge red tape most firms face, high costs of land, high electricity tariffs, impossible labour laws, etc; naturally, the burden is higher for smaller firms since, unlike large ones, there are no agents to handle these issues.

In this context, when Kamble was asked whether purchase reservations were better than, say, the government fixing various DoingBusiness indicators, he seemed to think the former was more important. Such a view from an SC/ST leader is unfortunate since it is obvious all enterprises—and that includes SC/ST—will do better if there is less red tape to deal with. It is this similar inability to distinguish between longer-term benefits and instant gratification that can be seen in the reservations policy for education/jobs.

It is obvious the policy is not working if, after reservations in college, reservations are required for jobs and, then, for promotions in these jobs. A more appropriate policy may perhaps be of intensive state-funded tuitions while in school and college along with skilling/reskilling later on. Unfortunately, very few SC/ST/OBC leaders are progressive enough to think along those lines.

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