A new study by the Cato Institute in the US has found that the process of economic liberalisation taking place in India since 1991 has struck a blow against the caste system. This is another example of the link between economic freedom and tolerance.

The economic benefits of India’s economic liberalisation are manifest and well-known. India went from growing at 3.5 per cent for decades to growth rates of 6 per cent after 1992 and 8.5 per cent between 2003 and 2011. Over 138 million Indians were reportedly lifted out of poverty between 2004-05 and 2011-12. The World Bank puts the figure at 140 million between 2008 and 2011.

A Colombia University study found this has had a disproportionately positive impact on those at the bottom of India’s caste system — dalits and scheduled tribes. Between 2004-05 and 2011-12, the all-India poverty ratio declined by 15.7 percentage points. The poverty rate of dalits fell by 21.5 percentage points whilst the poverty rate of scheduled tribes fell by 17 percentage points.

More than economic freedom But the Cato study found much more than that. Not only is economic freedom helping those at the bottom of the caste system, it is starting to rock the foundations of the system itself.

Since the advent of economic liberalisation in 1991,a growing number of dalits are working and operating businesses in agriculture, retail, hospitality, manufacturing and many other sectors where it was previously unheard of. There is a growing dalit entrepreneur class who actually hire upper caste workers. There are even over 3,000 dalit millionaires.

In western Uttar Pradesh, the proportion of dalits operating their own business has increased from 6 per cent to 36.7 per cent. Meanwhile, the proportion of dalits in the halwaha system (bonded labour) in eastern UP has fallen from 32.1 per cent to 1.1 per cent.

This is directly linked to the abolishing of the extensive licensing and permit system for occupations — a key component of the reforms. This was an insidious patronage network for upper castes and held back competition. Its removal has challenged caste allegiance. Fiercer competition means that upper caste business owners choose suppliers based on cost effectiveness, quality and efficiency rather than caste allegiance — even if the supplier is a dalit.

The Cato report drew upon a study from DeveshKapur, Lant Pritchett, Chandra Bhan Prasad and D ShyamBabu, which asked dalits in Uttar Pradesh to nominate if and how the caste system had changed. Respondents overwhelmingly identified the significant increase in dalit ownership of status symbols such as mobile phones, brick houses and motorcycles as key markers of progress.

But they also said social changes in the form of increased interaction and growing respect between castes were more important than economic advancements.

A new society The proportion of upper caste members accepting food and drink from dalits between 1990 and 2008 rose from 1.7 per cent to 72.5 per cent in eastern Uttar Pradesh. This transformation is in keeping with the Enlightenment tradition which views free trade and exchange between different groups as fostering trust, co-operation, co-dependence and respect.

Of course, dalits still face considerable discrimination. The area where the caste system still wields the most influence — rural India — also happens to be the area where liberalisation has proven the most difficult. But it is the next step in India’s free market transition to improve the lives of the approximately 30 per cent of Indians who still live in extreme poverty.

The writer is Research Fellow, Institute of Public Affairs, Melbourne

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