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The curious phenomenon of dalit entrepreneurship

The last two years have seen the emergence of dalit entrepreneurs in the national scene, suggesting a remarkable change in the Indian business landscape. Is it for real?

Rajiv Rao  |  New Delhi 

If Ayn Rand, founder of the philosophy called 'objectivism,' were alive and reading Indian papers over the last year or two, she would be thrilled. In them, she would find numerous mentions of an avalanche of dalit entrepreneurs who have become millionaires over the past few decades.

Rand was a fierce believer in both laissez-faire capitalism as well as the triumph of the individual, as embodied in her famous hero, Howard Roark. She railed against placing others above the self. Now, it seemed that after millennia of unimaginable oppression, dalits were able to harness the power of markets and the spirit of Roark and rise to the top.

Case and point, Rajendra Gaikwad, 50, founder of GT Pest Control, a Rs 8 crore company. "I didn't have chappals to walk to school in. A bicycle was a distant dream," he says. His family was often refused food at public functions at his village in Maharashtra and he had to endure heaps of insults for many decades. Today, Gaikwad drives a BMW, lives on the 17th floor of a high rise and has started yet another company, which makes conveyor belts that he estimates will book around Rs 30 crore in revenue this year. (Click here for table & chart)

In an effort to recognise the near-superhuman efforts of entrepreneurs of dalit business folk, like Gaikwad, the government recently awarded the Padma Bhushan to Milind Kamble, founder of the Dalit Indian Chamber of Commerce and Industry (DICCI) and a head of a Rs 101-crore construction empire, as well as Kalpana Saroj, head of Kamani Tubes, both who came from hard scrabble backgrounds.

But how representative is this spigot of success? Moreover, why is it important to get an accurate measure of how well dalit entrepreneurs have done?

Dalits represent close to 17 per cent of the Indian population, or 200 million people who have been brutally suppressed for millennia, and confined to 'Manu'-dictated occupations of scavenging, leather work or sewer-cleaning. This doesn't just leave enormous psychosocial scars on this community. It also isn't good business. Economists point to India's lost percentage points in gross domestic product growth simply because a large and potentially productive segment of the population is deprived of economic opportunity. So, gauging how well dalit businesses do has larger ramifications for the country.

And, how have they fared? Not terribly well, says Surinder Jodhka, a sociologist at the Indian Institute of Dalit Studies, New Delhi. Jodhka conducted an ethnographic survey of two flourishing industrial towns�"Panipat and Saharanpur�"and discovered that most dalit enterprises there were self-run and into very basic businesses and services such as shop-keeping and carpentry. Only a percent or two had started capital-intensive enterprises such as hotels and factories. Plus, only nine per cent of these mostly first-generation entrepreneurs�"largely between the ages of 20 and 40�"were able to take bank loans.

For sceptics of surveys, Jodhka's findings are reinforced by a study done by political scientist Ashutosh Varshney, who teaches at Brown University, US, along with Harvard Business School professors Lakshmi Iyer and Tarun Khanna. Studying the numbers from the Economic Census of India, which enumerates every non-agricultural enterprise in the country, the trio revealed that as late as 2005, SCs (Scheduled Castes) owned only 9.8 per cent of all the 42 million enterprises that employ around 99 million workers in 2005, well below their 16.4 per cent share in the total population.

More damning is that the national share of enterprises owned by SCs in 2005 was virtually the same as it was in 1990. Gujarat, which booked blockbuster growth of 8.5 per cent between 1999 and 2008 (versus 7.2 per cent nationally), similarly reported the same seven per cent share in SC-owned businesses in 1990 as well as 2005. "These entrepreneurs are real and to be welcomed," says Varshney, referring to the millionaire dalit entrepreneurs. "Without the post-1991 environment, they would not have emerged. But they are a very, very small proportion of the population," he cautions.

So, how does one account for another survey spearheaded by scholar Devesh Kapur, who chronicled an unprecedented increase in the wellbeing of dalits in the same period? This study surveyed 19,000 dalit households in two clusters of villages in Azamgarh and Bulandshahr, backward districts of Uttar Pradesh, where respondents were asked to compare their fortunes between 2007 and 1990.

The results were astonishing. Twenty-two and fourty-five per cent of the surveyed families in Azamgarh and Bulandshahr respectively, owned television sets in 2007 versus negligible numbers in 1990. While 40 per cent of them made a living removing carcasses in 1990, only 2.4 per cent did so in 2007. Most importantly, the survey reported considerably improved social standing. A significantly greater number of dalits were not seated separately at the wedding of grooms in the village (22.7 per cent in 1990 versus 91.1 per cent today in Azamgarh, with very similar figures in Bulandshahr). Today, a majority of non-dalit visitors to both villages readily accept food and drink, compared to almost none in 1990.

Is there some way to reconcile these seemingly divergent studies?

As Kapur et al's paper explains, "Migration has clearly been a powerful engine of dalit empowerment", which in turn brings cash to dalit households in villages and creates a labour shortage there, thereby "enhancing the bargaining power of dalit households… and weakening traditional clientilist political structures." (Clearly, Ambedkar knew what he was talking about when he identified the city as the site of dalit liberation). At the same time, however, dalits suffer from a severe shortage of assets. "A Jat farmer may have five acres or more, but these people have Rs 30,000 or Rs 50,000 at best and no income generating assets of their own," says Jodhka. Which means banks are seldom willing to lend to this community, depriving them of much needed capital to grow their enterprises. Then there's the 'network effect', where dalits are unable to leverage their community, like, say, the Agarwals in the sweets business, to their advantage.

This shouldn't be surprising. Most people have the opinion that market economies and the private sector are neutral agents, indifferent to hierarchies, and functioning on merit. Yet, a few years ago, sociologists Sukhadeo Thorat and Paul Attewell, in an experiment to test the urban labour market, submitted three fake job applications for every listed opening over a 13-month period�"one with an easily identifiable upper caste Hindu name, another with a Muslim name and one with a typical dalit name. All three had very similar fake educational qualifications and work experience. A regression analysis of the outcome showed that for every 10 upper caste Hindu applicants selected for an interview, only six dalits and three Muslims were chosen.

In a separate study, Jodhka and sociologist Katherine Newman conducted detailed interviews with human resource managers of 25 large firms in New Delhi. All the managers insisted merit was the sole determinant in hiring decisions. Yet, every manager also said "family background" (including the educational level of parents) was crucial in sizing up a candidate, something which would instantly put most dalit candidates at a disadvantage. "One must take the profession of deep belief in meritocracy with a heavy dose of salt," say the authors.

In other words, while dalits have posted measurable gains in their own lives, there is nothing to show that a similar widespread trend is taking place in the entrepreneurial realm. If they do succeed, it is primarily because of an indefatigable spirit and a belief in oneself that helps them claw their way to the top. would be pleased.

First Published: Wed, February 27 2013. 00:10 IST