The way forward for Dalit capitalism

In his 2015 Independence Day speech, Prime Minister Narendra Modi, speaking to the Dalit community, had said that rapid industrialization was its best bet for advancement. Speaking from the ramparts of the Red Fort on 15 August this year, he tailored his message somewhat. Economic progress, he said, could not guarantee a strong India; an emphasis on social justice was needed for everyone from Dalits to tribals.

This is not surprising. Dalit anger at the flogging in Una and the demolition of Ambedkar Bhavan in Mumbai has caused discomfort for Bharatiya Janata Party (BJP) administrations at both the central and state levels. Modi’s message was par for the course in this context. But the contrast between 2015 and 2016 raises an interesting point. The Modi government has bet on Dalit empowerment via the market in the form of its Stand Up India initiative, launched earlier this year—a scheme for encouraging greenfield enterprises by SC/ST and female entrepreneurs by facilitating bank loans between ₹ 10 lakh and ₹ 1 crore, along with supplementary measures. Leaving aside the wisdom of directing banks to front up what is essentially risk capital, how does this vision of Dalit capitalism stack up in light of social stigmatization that is still widespread?

The Manu versus Adam Smith debate has been around for a while now. The Dalit Indian Chamber of Commerce and Industry (DICCI), founded in 2005, is predicated upon the liberating power of the market. And the National Scheduled Castes Finance and Development Corporation (NSCFDC)—meant to provide capital and mentoring—was established back in 1989.

In ‘Rethinking Inequality: Dalits in Uttar Pradesh in the Market Reform Era’, Economic & Political Weekly, 2010, Devesh Kapur, Chandra Bhan Prasad, Lant Pritchett and D. Shyam Babu provided empirical ballast, detailing the results of a survey that confirmed the power of the market to change Dalit circumstances.

Designed and implemented by Dalits, the survey found significant social and material benefits among all Dalit households in two Uttar Pradesh blocks in the years after liberalization—as well as a concomitant increase in the number of Dalits running their own businesses.

But Dalit capitalism also faces significant hurdles; markets, after all, exist within a societal context. Caste and community links play a role in various aspects of the Indian market, from securing capital to integration into supply chains. There is rarely a clear demarcation between formal business networks and informal community networks; the latter are essential for the trust-based transactions that are common in a country like India. The fuzziness of these social networks interferes with market logic; demand and supply must be mediated via caste discrimination. The result is what political scientist Aseem Prakash has termed the “unfavourable inclusion” of Dalits in the market.

Writing in this paper in 2013, Ashwini Deshpande and Smriti Sharma have examined how this plays out at the ground level, using the Indian Micro, Small and Medium Enterprises census for 2001-02 and 2006-07. Their findings bear out the negative effects of Dalits’ lack of access to business networks with SC/ST ownership of manufacturing enterprises declined in proportion over the two censuses. More, the space such enterprises occupied in the market was also often determined by caste. Activities dealing with leather were the most important for Dalit enterprises, while they had a meagre presence in the food and beverages space. By and large, Dalit entrepreneurs were trapped in low productivity, bottom of the ladder activity.

This is not to invalidate the potential of Dalit capitalism. But while successful entrepreneurs of the kind represented by DICCI represent that potential, they are not, unfortunately, representative of the common experience. Access to funding is important—given the NSCFDC’s dismal performance to date, it remains to be seen how effective Stand Up India will be—but it is not the only factor. The private sector has played a significant role in bolstering black capitalism in the US via targeted inclusion of black enterprises in supply networks. This will be necessary in India as well in the Dalit context. While there have been positive signs from groups like Tata and Godrej, there is little to show for it yet in a wider context. Integration in government supply chains while keeping financial concerns in mind is also a must.

Liberalization and political empowerment have changed the Dalit experience and expectations over the past quarter century. The current Dalit anger that the BJP is attempting to deal with shows this clearly. Dalit capitalism is the next step forward. But for the market to succeed, it will first have to deal with old prejudices.

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