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Economic Implications of Job Reservation in Private Sector

Indian National Congress in its 2014 Lok Sabha (Lower House of Parliament) Election Manifesto declared in last week of March, 2014 has stated that The Indian National Congress is committed to creating national consensus on affirmative action for Scheduled Castes and Scheduled Tribes in the private sector. Though this stand by Congress Party might have been taken out of sheer desperation to consolidate its position on losing grounds in forthcoming elections, but its economic and social implications are far reaching for Indian economy and society.


In today’s globalize world economic enterprises survive and grow purely on its economic efficiency. And for efficient operation of any economic enterprise qualitative man power or human capital is must. If we extend the reservations of jobs based on caste, it may bring down the efficiency drastically though equity may improve marginally. This in turn will bring down the profitability of many firms and many will perish in due course  of time being non competitive to other overseas competitors. The FDI in country will reduce as overseas companies will not be interested in enforcing reservations in jobs in their companies.  The revenue collection of government in form of taxes will reduce and whatever social welfare programmes for Schedule Caste and Schedule Tribes are being taken may even become difficult to sustain due to financial constraints.


On social front, it will create social tension in society, as it was created when reservation policy for OBCs in government jobs were introduced by Mr V P Singh. In that process social turmoil was created where hundreds of youths committed suicide. This social tension could have been escalated, but thanks to visionary economic policies of Mr. P V Narsimharao government that created huge job opportunity through liberalisation of economy. But, no such other scenario exists once the reservations of  job in private sector is introduced.   


Therefore, it will be biggest blunder of Congress Party to advocate for reservations in private sector. It would be better for government  to take up social programme of capacity building of SC/ST/OBC candidates through free education and special coaching etc. 


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