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Discrimination means differential treatment subjected towards different groups. This segregation or classification of groups can be on several grounds. It can be on the racial grounds as in USA or on basis of gender, caste, religion or sexual orientation as has been observed in the rest of the world. In India specifically, it assumes a multifaceted form on basis of caste, gender, religion, language and region. Any form of discrimination is of economic interest because differential treatment leads to differential allotment of endowments which in turn leads to unequal distribution of income leading to increased levels of inequality and thus stunted economic growth. In this paper, I will analyze the various forms of discrimination prevalent in India, establish that discrimination continues to remain as prominent, even in the 21st century, discuss the impact of globalization on discrimination, establish a negative relationship between discrimination and economic growth and finally discuss the relevance of existing affirmative action. DISCRIMINATION IN INDIA In India, discrimination is multifaceted and assumes various forms on basis of caste, Gender, religion , language, culture and region. This paper primarily focuses on Gender and Caste discrimination.

The operative category that determines the contemporary Indian social code is Caste or jati. There exist over 3000 jatis that follow a much more complex system of hierarchy. Broadly the society can be divided into four castes in descending order of social stature : Brahmins ( the priests), Kshatriyas ( warriors and rulers), Vaishyas (Skilled traders, merchants and minor officials), Shudras ( unskilled workers) and Pariah (untouchables, outcastes). This kind of caste division has been responsible not only for social but also an occupational division of labor. As an example, Dalits and lower castes have been found engaging in unskilled low income jobs.

As Manusmriti rightly points out, women and shudras have always been subjected to the same kind of treatment, in terms of denial of access to privileges. Even today, in the HDR, Indias rank on the basis of Gender Inequality Index is as low as 119 with inequality index being .748, which is very high in comparison to other developed economies like Japan where this index stands at .27. Economic discrimination can be divided into two types : Statistical discrimination and Taste based discrimination. Model of Taste based Discrimination as given by Becker (1952) is based on taste and preferences where employers hold a prejudice against employing certain group of workers. It is both unfair and pareto inoptimal and economists argue that as competition becomes more strenuous and more non discriminating employers enter the market, this kind of discrimination ceases to exist as discriminating employers now have to compensate out of their own pockets. Statistical theory of discrimination given by Arrow (1973) whose major

premise is that employers have incomplete information about the skills of job applicants. This gives them an incentive to use easily observable characteristics such as caste and gender to infer the expected profitability of the applicants. This form of discrimination seeks market signals to assess the expected productivity of the candidate. The forms of economic discrimination are: Pre market discrimination ( education and health) and Labour market discrimination (Job discrimination and wage discrimination). PRE MARKET DISCRIMINATION Under pre market discrimination we start with education and health. Education and Health are considered to be two skill enhancing components of the endowment bundle. Expenditure on education, training and health is regarded as investment in human capital. A better educated individual makes better decisions and does not suffer from the constraint of asymmetric information. Education also acts as a signal in labor market to attract better jobs. Improved health of an individual also improves his efficiency and increases his productivity. The pre-market discrimination assumes differential allotment of skill enhancing privileges amongst people on the basis of gender and caste which also overlaps regional and sectoral barriers, making the marginalized sections less productive in comparison with others. Education levels of Household Heads (by caste)- 2005-06 Categories Education level % of SCs % of STs % of OBCs % of Others

0 1 2 3 4 5

47.33 11.84 7.33 25.77 3.28 4.38

55.22 13.82 5.81 19.66 1.94 3.5

38.92 10.9 8.32 30.91 4.13 6.74

25.65 10.73 6.55 35.45 6.18 15.35


0-no education,1-incomplete primary, 2-complete primary, 3-incomplete secondary, 4complete secondary,5-higher

Illiteracy over time by Gender and Rural/Urban

Rural males

Urban males

Rural females

Urban female





















HEALTH PATTERNS Health Indicators on basis of caste and ethnicity

The latest Human Development Report of 2008 has recorded the Female Mortality ratio, ratio in India to be 450 as against 1 in Ireland, 6 in Japan and 8 in UK. It has been observed that women and dalits have always been the marginalized sections, underprivileged in terms of access to reasonable health conditions and education.This discrimination could be on grounds of orthodox ideologies of people coupled with income inequalities across different castes. This kind of discrimination is completely taste based which is not optimal and unfair. Thus these sections are rendered underproductive in comparison to others who are more privileged in comparison, leading to circularity in the vicious trap of poverty through lower earnings, lower education and material deprivation. LABOR MARKET DISCRIMINATION Job Discrimination

It has been observed that there is rejection of work allocation to the willing on grounds of their being lower caste or females. This means there is differential work allotment to different groups of people, separable on the basis of caste or gender, otherwise comparable. Wage Discrimination

This includes differential pay and rewards for same kinds of work Unemployment rates in Urban India Males Usual(ps) 38th 5.86 50th 4.54 55th 4.81 61st 4.42 Females Usual(ps) 38th 6.92 50th 8.21 55th 7.05 61st 9.25

Usual(ps+ss) 5.08




Usual(ps+ss) 4.85
























Occupational levels of household heads, by caste:

Categories Education level % of SCs

% of STs

% of OBCs

% of Others

1 2 3 4 5 6

4.94 67.54 14.03 9.77 3.44 0.28

2.74 79.23 9.46 5.1 3.26 0.21

6.39 56.66 19.49 12.5 4.56 0.39

8.05 45.68 25.08 11.25 8.44 1.5

1=not working, 2=manual labourers and farmers, 3=clerical workers, sales workers, service workers and merchants, 4= creative workers, artisans,5=professional, technical and administrative managers(low level), 6=high level managers

Gender based Wage Differential for salaried Workers, By Education and Rural/Urban

160 140 120 100 80 60 40 20 0 1983 1994 2000 2005

Graduate and above urban Middle urban Illetrate Urban Graduate and above rural Middle rural Illetrate Rural

This figure shows that similarly educated men and women earn significantly different real wages. The gender gap in wages for this highly educated category of workers has consistently widened in both rural and urban areas, rise being sharper for urban workers.

Discrimination in labor market could be partly taste based(wage discrimination) and partly statistical(job discrimination). Statistical discrimination is in fact a consequence of taste based discrimination. Economists might consider statistical discrimination to be efficient but its not fair on the average and there is always an equity-efficiency trade off. In the labor market too, it has been observed that a majority of lower caste people and women are engaged in casual unskilled labor and there too, wage differentials are immense. EFFECTS OF GLOBALIZATION ON DISCRIMINATION Neo- Classical literature suggests that with an open economy, there is increased competition and there are new non discriminating employers in the market. This would mean reduced job discrimination as well as reduced wage gap. However, actual evidence suggests otherwise. According to NFHS Surveys, two decades of liberalization have not started to close inter caste gaps. In India, foreign interest may find it easier to adjust to and hence perpetuate pre-existing patterns of inequality, rather than break them. The following are the causes for this discrepancy: Guided by expediency of profit maximization, foreign players adopt statistical discrimination to save cot and time, thereby hiring those with better signals, who happen to be higher caste men in Indian context. Secondly, globalization opened up avenues for more technologically advanced industries and as we have seen that a majority of dalits have received no formal training and education, they were consequently rendered incompetent for the jobs. Thirdly, the kind of jobs that have been created post globalization seek fluency in English and computer literacy as critical requirements in which dalits are again disadvantaged. Thus they are not only battling historical prejudices but also have to face modern contemporary forms of discrimination. Also, it could be a result of increased privatization and informalization in the market with no protection to workers and these minorities who suffer from constraint of incomplete information are doubly disadvantaged. Though there hasnt been much change in inter caste disparities over the last two decades post globalization, there has been a change in pattern of female employment. Female labour force participation rate has increased from 16% in 1991 to 36% now. This might look like a positive aspect of globalization and a twofold increase in employment pattern of women cannot be underestimated. Especially in Export Processing Zones, share of women employed is 70-80%. However, a deeper analysis of wage differentials show that wage gap remains highly skewed in favor of men. This reversal in trend has not been a result of increased productivity of women because evidence furnished above shows no significant improvement in their educational level. Neither can this be attributed to modernization of societal notions because notion of womens inferiority exists till date. Thus this reversal in trend has been a result of crude profit maximizing intentions of MNEs who prefer women workers primarily because of their vulnerability. IMPACT ON ECONOMIC GROWTH Economic growth may be affected by discrimination through the following links: The selection distortion factor of Discrimination and inequality in education, the Direct Externality Factor of education, selection distortion effect of Employment discrimination, measurement effect of employment inequality, discrimination against equally productive individuals in managerial

positions, social tensions and rifts among the privileged and deprived sections of the society creating social unrest and instability. Operating through following linkages, discrimination has a negative impact on economic growth. Thus it is a social prerogative to stop discrimination for an increased economic performance. RATIONALE FOR AFFIRMATIVE ACTION AND ITS SUCCESS AA in India operates mainly through reservation of minorities in various fields including educational institutions and public sector jobs. Its main objectives are : To reduce inter group disparity being persistent and systematic, to provide a level playing field to members of SC-ST communities as well as women for the desirability of equality of opportunity for all, to compensate for the historical wrongs of a system that generated systematic disparity between caste groups and actively discriminated against certain groups. Galanter (1991), in his comprehensive study of Indian AA program states that substantial redistributive effects have been witnessed with spread of access to education and jobs in the wider caste spectrum although a large section of rural dalits have been untouched by these quotas in government jobs and education. Thus India AA has been a partial success. Major reforms have been witnessed in electoral sector where most of the seats are occupied, both for females as well as lower caste people. Cross Country Studies by world bank and others have shown a positive relation between increased representation of these minorities and their improved welfare. However this is not completely free from limitations and controversies. Firstly, the classification of people done on the basis of caste as SC, ST, OBC and Others is questionable. Secondly, Preparation of OBC list has been influenced by lobbying such that many prosperous and dominant jatis have managed to get themselves labelled as backward. Thirdly there are many groups in the Others category who are economically as backward as SC-STs but are not the beneficiaries. Also scope of AA has been limited to public and organized sector, and with more than 92% of workforce engaged in informal sector, it is not really of much help. Not many effective policies have been made for protection of women workforce engaged in private sector, who are not only subjected to the inferior conditions of work and pay but also face an extremely unsafe working environment, especially in the unorganized informal sector where sexual harassment in workplace, physical and verbal abuse from male supervisors, restricted use of toilets and denial of lunch breaks are common grievances. Dalit women in this context remain doubly disadvantaged. Thus while formulating AA, issues like scope, identification of actual beneficiaries and form, whether based on merit or economic backwardness need to be kept in mind. POLICY SUGGESTIONS Allotment of non convertible Educational vouchers to every household irrespective of the caste or gender of the potential student. Introduction of job oriented education by introducing more demand driven vocational training programs, mainly focusing on marginalized sections of the society which makes them more employable and productive.

Above two measures constrain the scope of statistical discrimination as now these weaker sections will be as productive as the others thus improving their signals in the market. As for taste based discrimination, where an employer discriminates against an equally educated and efficient dalit or a woman, strict punitive laws should be formulated and such taste based discrimination should be made illegal. As far as sectoral reservation is concerned, electoral field has highly benefited as dalit leaders have played a vital role in representing the grievances of his community and solving them though monitoring of all such activities and their impact should be done on a regular basis. Lastly, AA should be supplementary rather than complimentary. If quotas remain unfulfilled (which is a common sight), then eligibility qualifications should be revised and reconsidered.