India's consumption story is yet to address the caste discrimination issue

Ages-old bias could also be affecting what traditionally deprived communities earn

When Babasaheb Ambedkar returned to Baroda during the First World War after studying in the United States and in London, he could not find a hotel that would lend him a room. He lied about his caste identity so that he may have accommodation, only to be thrown out after the ruse was discovered.

A paying customer was turned down for his caste. Is caste shaping India’s consumption story a hundred years later? The country is set to overtake Germany to become the fourth-largest consumption market in the world in 2024, according to a recent report by financial services major UBS. India is expected to overtake Japan and become the third-largest one by 2026.

People of scheduled caste (SC) and scheduled tribe (ST) communities can show as high as a 7 per cent to 20 per cent gap in consumption expenditure, show Business Standard calculations based on data from the Household Consumption Expenditure Survey (HCES) 2022-23. This means that they are able to spend only between Rs 80 and Rs 93 for every Rs 100 spent by Indians in general. The gap depends on whether the setting is rural or urban as seen in chart 1.

The gap has narrowed, somewhat, over time. It had touched 27.9 per cent for SCs in 2004-05 and 23.7 per cent for STs in 2004-05. Academic research shows a similar gap between races in the United States. Black households are said to have lower consumption than their white counterparts.

India’s gap extends to wages as well, which in turn can play a role in consumption. Those belonging to the SC/ST communities earn less than others irrespective of whether they are involved in casual wage work, employment with a regular wage or are self-employed, shows data from Azim Premji University (State of Working India 2023 report). The gap varies 10 per cent to 29 per cent (chart 2).

Education shapes wages. SC, ST and other backward class communities have access to lower levels of education with fewer median years of schooling compared to other communities (chart 3).

Another way caste can affect consumption is access to credit. Much of India’s recent consumption is said to have been aided by a boom in lending through personal loans and similar credit. Those belonging to traditionally discriminated castes could face bias in institutional lending.