I have no choice.” These four words by justice Dalveer Bhandari summarize the Supreme Court’s judgment last week on one of the more dubious changes in India’s Constitution in recent times: the 93rd Amendment.
Enacted by Parliament in January 2006, the modification allowed the government to impose new class-based quotas for entry into most educational institutions, even private ones. Three months after that amendment became law, human resource development minister Arjun Singh said the Union government would reserve 27% of all seats in the prestigious Indian Institutes of Technology, the Indian Institutes of Management and Centrally-funded universities for “other backward classes.”
That would be in addition to the existing 22.5% quota for “scheduled caste and tribes.”
The “other backward classes,” are numerically preponderant (one estimate says they account for 52% of the population), increasingly affluent, and since the 1960s have been politically well organized. In many rural areas, they are the economically dominant groups.
Several writ petitions challenged the tweaking of the Constitution to favour this group. The amendment, they argued, would forever divide the country along caste lines.
The Supreme Court last week let the government have its way. The judges issued one caveat: The benefits mustn’t be cornered by the educated rich. The court made an additional, non-binding suggestion. The coveted openings, it said, shouldn’t go to those whose entrance-test scores are far worse than of those admitted purely on merit.
The court’s order effectively clears the way for the government to dispense educational opportunities—among the most valuable commodities in a fast growing economy—on the basis of a citizen’s rank on a primordial social order.
“I have no choice but to uphold the impugned legislation by which the government may still identify socially and educationally backward classes, in part, by using caste,” said Bhandari, one of the five judges on the bench.
The die was cast when the first amendment to the Constitution—in 1951—allowed the government to make special provisions “for the advancement of any socially and educationally backward classes.” By introducing that change within a year of adopting the Constitution, the framers sowed the seeds of what has now become a glaring departure from their own goal of a casteless society.
The present government has also been talking about introducing caste-based quotas in jobs, similar to those that already exist in government departments and state-owned companies. Such a move, a most egregious intrusion by the state into private affairs, looks entirely plausible now.
What all of this means for investors may become more obvious as early as the next elections, which may be held later this year or in 2009. One implication of overt caste-centric politics is the very real possibility of greater fragmentation of the electorate, already reflected in unwieldy coalition governments that can’t move decisively in any direction. Had all the promises by Indian governments in the past 10 years been kept, from changes in labour laws to ending the state’s domination of the pension-management industry, the economy might well be growing at more than 10% a year by now.
Bad for the economy
But the electoral arithmetic is stacked against economic pragmatism. Democratically elected leaders in India’s UK-style parliamentary system can—at zero cost to their political future—stall sales of state assets or waive farmers’ debts.
The tension between special interests and the will of the majority is seen in almost every democracy. But while the efforts of the sugar lobby in the US are centred on retaining its subsidies, the unstated goal of every new caste-based political group in India is to make the entire gamut of national politics a little more irrelevant. To a large extent they have already succeeded. The two main parties—the Indian National Congress and the Bharatiya Janata Party—together control a little more than 50% of the seats in the Lok Sabha, a 7 percentage point fall since 1998. A big chunk of the remaining lawmakers are from small, regional parties that appeal only to a few caste groups.
Investors must watch this trend closely.
In the last election in 2004, had any party managed to win a little more than 20% of the eligible voters in each of the constituencies in Uttar Pradesh, the country’s most populous state, it would have walked away with at least 59 seats in the Parliament, or 11% of the total. The politician who wins such a lottery by being on the right side of the caste dynamics could become the prime minister even if the person or his party has no agenda for the country’s future.
A constitution that gives citizens little protection from the state, combined with a very large incentive for politicians to seek power through discrimination, is a lethal combination.
Malaysia went down this path at the expense of economic dynamism; India should change course before it’s too late.