Obviate quotas

In India, it is called reservation or quotas; in the US they prefer affirmative action, which is not the same thing. When he addressed the Confederation of Indian Industry's annual meeting on Tuesday, the Prime Minister twice used the latter term. "I urge industry to seriously consider enhancing educational and employment opportunities for weaker sections ... and promoting their employment in an affirmative manner ... Such affirmative action on your part can be a crucial component of the inclusive society we hope to build." He also used the term "voluntarily".

The terminology should have reassured the gathering that job reservations would not be forced on the private sector. But such is the prevailing air of suspicion about the government's real intentions that the chairman of Wipro, Azim Premji, was quick to respond by talking of international competitiveness and added, "My company believes in hiring people based on merit." Other captains of Indian industry have not been as forthcoming, so far. But they secretly agree with Mr Premji. Meanwhile, the Prime Minister's soft words have come under attack from the intended beneficiaries of reservations also. They are saying he should not have said it should be done "voluntarily", meaning thereby that quotas in the private sector should be mandated by law""something that the government has said it does not want, even as it prepares the required legislation.

The term "affirmative action" has its origins in the US, where there is no compulsion to hire African-Americans, and it is left to the social conscience of the private sector to do the "right" thing. But whereas the putative beneficiaries of affirmative action in the US constitute no more than 11 per cent of the population, here they account for anything up to 75 per cent of the total. This simple demographic fact makes a crucial difference to the degree of affirmative action that is socially, politically and economically acceptable. In the US, if 3-5 per cent of the employees are African-Americans, it is regarded as being progressive and whatever impact there is on efficiency is minimal; here the corresponding figure is 49 per cent. Can anyone imagine a firm facing constraints with regard to recruiting half its employees? This lies at the heart of forcing quotas on employers, never mind whether they are in the private sector or the public. Clearly, the Prime Minister knows it would hurt the economy to force such quotas on the private sector but he also feels obliged to pander to the larger political space that he now inhabits. The problem is that every time he mentions such things, there is a small accretion of legitimacy to what is a very bad idea. From "social control" of banks to nationalisation was but a short step, taken purely and only for political reasons.

One alternative to reservations would be to devise a set of proper incentives aimed at nullifying or minimising the impact of not employing people purely on merit. These would have to be fiscal in nature, designed to offset or compensate for loss of competitiveness. But the best alternative of all is to educate the intended beneficiaries so well that there is no need for quotas. What was a social justice and equity problem 60 years ago has become a problem of supplying good education now. That is how it should be tackled.