The role of caste in economic transformation
June 23, 2022


  • The article discusses the reasons behind India not generating a pattern of growth that produces jobs and inclusive development in the way most of the East Asian countries have done.
  • Caste has been discussed as a structural factor that is impeding economic transformation in India. The occupational and spatial mobility in the Indian economy has been shaped by the caste system.


  • Misery: India has been in a phase of jobless growth for at least two decades now, coupled with rising poverty and discontent in rural areas.
  • Outburst: The ongoing protests against the Agnipath programme, agitations against farm laws a year before, and agitation for reservation by agriculture castes are all arguably an outcome, simmering discontent due to this jobless economic growth.
  • Failure: Hence India failed on two fronts as follows:
  • Lack of strong growth in productivity within the farm sector which is crucial for sustained economic growth
  • Lack of educated workforce which is equally necessary to move to the modern sectors

Link between economic transformation and caste

  • Misinterpretations: In contemporary literature too, caste enters as a post-facto category in understanding inequalities in economic and social outcomes when the fact is that caste is central to economic transformation itself.
  • Contrary ramifications: Caste through its rigid social control and networks facilitates economic mobility for some and erects barriers for others by mounting disadvantages on them.
  • Accessibility: Caste shapes the ownership pattern of land and capital and simultaneously regulates access to political, social, and economic capital too.

Global overview

  • All the nations which succeeded in achieving inclusive growth in the Global South had land reforms combined with human capital, invested in infrastructure by promoting capitalism from below and began industrialisation in the rural sector.

Caste impeding economic transformation in India

The divergent outcomes in structural transformation between countries in the Global South, particularly India, China and South East Asia, is due to these three factors.

  • Ownership and Land Inequality related to productivity failure within the farm sector
  • Elite bias in higher education and historical neglect of mass education
  • Caste-based entry barriers and exclusive networks in the modern sector

Historical underpinnings of land inequality in India

  • India has one of the highest land inequalities in the world today. A brief saga of this inequality is defined as follows:
  • Colonial interests: Unequal distribution of land was perpetuated by British colonial intervention that legalised a traditional disparity. Some castes were assigned land ownership at the expense of others by the British for its administrative practices.
  • Artificial distinction: The British inscribed caste in land governance categories and procedures. As a result they made an artificial distinction between proper cultivators who belong to certain castes and those labourers i.e., lower caste subjects who cultivated granted/gifted lands that have institutionalised caste within the land revenue bureaucracy.
  • Post-independence set-up: The subsequent land reform that took place after India’s independence largely excluded Dalits and lower castes. It emboldened and empowered mainly intermediate castes at the expense of others in rural India.
  • Green Revolution Phase: The Green Revolution that brought changes in the farm sector did not alter land inequality as it was mostly achieved through technological intervention.
  • Few castes tightening social control: Though India has certainly seen surplus food production since then but the castes that were associated with this land pattern and benefited from the Green Revolution tightened their social control over others in rural India.
  • Gratification: Land still defines social status and pride in many parts of rural India.
  • Moreover while land has lost its productive capacity since the 1990s, owing to the real estate and construction turn in the Indian economy, but it still works as a source of inheritance, family lineage and speculative capital.
  • Liberalization reforms: The economic reforms of the 1990s were a watershed moment as the farm lobby lost its power. Even those who made surplus in farm sectors could not transform their status from cultivators to capitalist entrepreneurs in the modern sectors, except a few castes in western and southern India. It can be attributed to two reasons:
  1. Historical neglect of education
  2. The entry barriers erected by the upper castes in modern sectors
  • Outcomes: The recent agitations by the Jats in Haryana and Punjab, the Marathas in Maharashtra and the Patels in Gujarat, demanding, among other things, reservation for their castes in higher education and formal jobs exemplify this new trend.

Education and caste linkage

The political scientist Myron Weiner had argued, India suffered from caste bias in education which is evident from the following:

  • Elite bias: The British colonialists educated tiny groups of elites, largely from upper castes, for their own administrative purpose.
  • Non-adherence to Constitutional directives: Although the Indian Constitution guaranteed free and compulsory education under its directive principles, it was hardly translated into practice. Instead, attention was given to higher education for the elites.
  • Ripple effect: The inequality in access to education got translated into inequality in other economic domains including wage differentials in India.
  • Inequity: Indian elites sustained their position at the top by denying education to a substantial proportion of the population till positive discrimination policies were implemented in higher education.
  • Repercussion: India’s turn toward service growth particularly its claims of emerging as a leader in software development and a natural inheritor of soft power is arguably an outcome of this historic elite bias in education.
  • Comparison globally: In contrast, the Chinese and other East Asian countries invested in basic education and gradually shifted towards higher education. Their success in manufacturing is a direct outcome of the investment in human capital.
  • Analysing labour market: The contemporary global labour market trends mirror this skill spectrum; as South East Asia and China captured low-end manufacturing jobs, India largely concentrated in high-end technology jobs.

Caste as a barrier to entrepreneurship

  • Comparison to China: Yasheng Huang, a Chinese economist, argued that rural entrepreneurship in China was able to grow out of the traditional agricultural sector on a massive scale.
  • Rural India, in contrast, hampered by a poor endowment of human capital, could not start entrepreneurial ventures even remotely on the scale of the Chinese.
  • Barriers to economic diversification: Caste shaped policy outcomes, including India’s highly unequal land reform and lack of public provision of education and health, which in turn erected barriers to economic diversification.
  • Lack of mobility: Castes that were already in control of trading and industrial spaces resisted the entry of others. Even those who had economic surplus in farm sectors could not invest in non-farm modern sectors. In contrast such a transition took place in South East Asia, where diversification into urban enterprises by agrarian capitalists was possible.
  • Mounting resistance: Social inequalities have mounted barriers for economic transition. Agrarian capital also could not move into modern sectors due to these roadblocks.
  • Few successes: The relative success in South India is being attributed to the ‘Vaishya vacuum’e., an absence of traditional merchant castes.

Making transition

  • Truncated transformation is partly an outcome of this interface between caste and economy. For caste is not a residual variable, but is an active agent which stifles economic transformation
  • Arthur Lewis, a Nobel Prize winner for development economics, and William Schultz, an American economist who shared the prize with him the same year in 1979, emphasised accumulation of physical capital for economic transformation in the developing world and underscored the need for human capital for better transition to modern sectors.
  • Hence emphasis should be laid on educated workforce which enhances productivity, and boosting & incubating entrepreneurship ability which is increased through education, training, experience etc.
  • In the interim, which could be many decades, policies aimed at fostering growth would be more effective if they took account of the underlying caste networks that continue to shape educational, occupational, and locational choices in the India.