Debating India


Skill On Skid Row


Monday 21 June 2004, by MUKHERJEE*Arindam

Industry rejects private sector reservation plan, say services, FDI will be hit bad

"The UPA government will immediately initiate a dialogue with industry and other parties on how best the private sector can fulfil the aspirations of scheduled caste and scheduled tribe youth."

- The Common Minimum Programme of the UPA government

The spectre of reservations on caste basis has been hanging over the Indian private sector for quite some time now, but very few in industry gave it much thought. Very few believed-liked to believe-that it could happen. Now, it suddenly looks real. And at a time when Indian industry finally seems to have learnt the ropes of global business.

At a time when it is fiercely fighting an invasion by cheap imports, when our services sector is recognised the world over as an incredibly potent force. A time when people like Italian PM Silvio Berloscuni talks of expanding the G-8 conclave of economic powers to include India and China because "that is where the future lies".

The signs were there in the Congress election manifesto which talked of creating a national consensus on the issue of getting a reasonable share of jobs in the private sector for the backward classes-for which a dialogue with private industry was to be initiated. The CMP only reiterated this idea.

While political parties aren’t likely to go against such a proposal-looking at the potential votebank-India Inc is aghast. It feels this will ultimately show in reduced efficiency, productivity and competitiveness, and make sure Indian industry loses the global business war. Says Vikram Talwar, CEO, EXL Services: "It’s ludicrous. The entire industry will go down the drain. The dream of a multi-billion dollar business process outsourcing industry, forget about it."

Over the years, several state governments have mooted proposals favouring job reservations in the private sector. Last year, then Karnataka CM S.M. Krishna had said reservations in the private sector may be inevitable because globalisation and privatisation had led to a reduction in the vigil against discrimination.

In UP, ex-CM and Dalit leader Mayawati too had come up with a similar proposal, and now in Maharashtra there is strong debate within government and industry circles over a state proposal to reserve as much as 52 per cent jobs in the private sector for the backward classes.

If the UPA is looking for a national consensus, there is already one within Indian industry. Not a single businessman Outlook spoke to was pro-reservation on caste basis. Most were anti- any sort of reservation, while some felt if it has to be there, it should be on economic and not caste basis. The unanimous view: in a competitive scenario only merit and performance should matter, especially as imports are on the rise following a decrease in tariffs under India’s economic reforms as well as due to clauses of the wto agreements India is a signatory to.

Forcing industry to employ people on qualities other than merit is a surefire suicide recipe, feel Indian businessmen. Says srf head Arun Bharat Ram: "If our hands are tied behind our backs, we cannot race ahead. Many of us employ people from these classes and everyone is treated on merit. Why then create an artificial division within employees?" bpl Innovision chief Rajeev Chandrashekhar echoes his sentiments. "Reservation will not increase job penetration for the lower sections. Industry is already disadvantaged with high cost, bureaucracy and delays. You can’t add one more and expect us to produce growth," he says. N. Srinivasan, director-general-designate, cii, agrees: "We’re ready to initiate a public-private partnership where we can make such people more employable through training programmes. But we’re not ready to compromise on merit. This will have a negative connotation in the external world and fdi may be affected."

As it is, a serious industry backlash may be in the offing leading to further loss of jobs.

According to the last Economic Survey, the number of private sector employees fell from 87.48 lakh in 1998 to 86.52 lakh in 2001. Reasons: increasing mechanisation of production processes and the pressure to downsize, hike productivity in the face of rising competition. However, with industrial growth rising in the last fiscal, jobs could have opened up in the near future. Those plans are getting a relook now.

The biggest casualty, however, could be fdi, because foreign investors will look only at lost efficiency and low productivity, having little interest in social justice. Former disinvestment minister Arun Shourie agrees. Talking to the media recently, he said: "Investment will be more uncertain in an increasingly competitive world, if jobs are given on the basis of my birth and not on the basis of my capability."

Knowledge-based industry, our great hope, is particularly worried. Sectors like software and IT-enabled services are heavily dependent on people’s skills. The quality of the staff is its only capital, only asset. Says Vishnu Dusad, MD, Nucleus Software: "We’re looking at a mass scale massacre kind of a situation. The MNCs will never understand this and software contracts to India may start slowing. I need skilled people to develop mission-critical software. There can be no compromise on that just for social reasons."

Last year, Infosys chairman and chief mentor N.R. Narayana Murthy had said he favoured reservation but one based on economic criteria. He said: "I’m not against reservation, but it should be based on economics and not caste. If a person is hampered by resources, I think those people should be given reservation."

The unease is palpable in the services sector which accounts for more than 50 per cent of India’s GDP today. Says a BPO company head: "You can’t tell your client that 33 per cent of your calls will be attended by Class B executives and 15 per cent by Class C executives. They want Class A+ service for all, which we wouldn’t be able to provide." Agrees Bajaj Auto chairman Rahul Bajaj: "In the services sector, the question of productivity will come in much more. What happened to the public sector hotels is before all of us."

Raman Roy, CEO, Wipro Spectramind, India’s second largest call centre operations, has this take: "If the executive cannot deliver on the job, the client will just move away. There are no social arguments here. Instead of job reservation, we need skill upgradation through universities where reservation already exists."

So what will India Inc do if it finally happens? Well, recruitment plans could be shelved, some may even look for ways of escape. Dusad, for instance, says he would look at China or another country if he had to hire on a large scale.

The strong reactions has pushed Congress leaders on the defensive. Says a party economic think-tank member: "The CMP wasn’t in favour of compulsory reservation...its objective was to create a debate to devise viable alternatives."

Finance minister P. Chidambaram too reportedly assured industrialists during a recent Mumbai visit that government would not legislate on this issue. Of course, there is also the question of whether such legislation will be constitutionally valid. It’s certain that if such a legislation is tabled, it will be passed by Parliament, since no political party will want to look anti-backward class, anti-social justice. What is equally sure is that such legislation, if passed, will also be challenged in the courts. Says Talwar: "If the government is bent upon making the Indian industry uncompetitive in the world, we will have nothing to say. We just hope there is enough intelligence left in the country to prevent this."

Whichever way the reservation issue pans out, it’s clear that with industry rethink on recruitment plans, the employment scenario, at least in manufacturing, may not improve in the near future.Perhaps the government will have to choose between social justice and industrial growth. Or think whether we can sustain social justice without social harmony.


in Outlook India, Monday, June 21, 2004.

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