Tax - A Tool For
By S Sharath
20 June, 2004
I sit down to write this piece, I have in front of me, the statement
from N.R.Nararyanamurthy, that doyen of free market economy in India,
opposing the demand for reservation in private sector. I also happen
to see, on a daily basis, the numerous articles filling up main stream
media (read upper caste media) presenting umpteen reasons to oppose
any reservation in private sector. All of these arguments harp on the
need to preserve merit over any other consideration. The meritorious
should not be punished for being so. Private institutions are profitable
because they employ the meritorious only. This seemingly genuine argument,
then effectively posits that all reservation is bad as it prefers unfit
persons over meritorious ones. Thus reservation is the reason for all
the issues, India faces today. Indian media and corporates also turn
a blind eye towards affirmative actions supporting blacks, women and
other minorities prevailing in the mecca of capitalism, United States.
For the caste dominated
Indian media and the coporate hierarchy only merit matters. Corporates
exist for profit and only merit feeds profit. State has no authority
to encroach upon free economy. If that is the case, then merit needs
a closer look.
Is it really merit
that rules the Indian economy? A brief look at the corporate employee
distribution, will reveal what merit means. 80% of the personnel in
corporates, media and bureaucracy belong to an upper caste community
comprising less than 2% of India's population. Is it because the people
of this caste are highly meritorious? Or is it becasue they are collectively
shutting out other communities from entering the scene? A sort of corporate
ostracism? All evidence suggests the latter.
In the MNC this
author works, you will never come across a dalit. A Muslim or a person
from backward caste is a rarity. 'Mandal' is the most accursed word.
NDA was the best thing to happen to this country. Merit means securing
seats in the premium educational institutions of the country , securing
a job in a firm already filled with people of your own caste who will
select people from their own caste.Let all educational institutions
be privatiesed, let them charge hefty amounts as fees, only that way
can you assure placements for the 'meritorious'. And what about using
the infrastructure of this country established with taxpayers money
including that of the the 'unmeritorius' majority to mint profit? Oh,
its only natural justice !
So merit is more
often than not determined by birth! And that is only justice too ! Does
the well being of 2% of the population means feel good for the entire
country? In such a case do the state need to intervene?
point is the genesis and maintenance of capitalism in India. Unlike
the first world, where capitalism takes on the garb of liberalism, showing
off a progressive face with democracy and affirmative action, the Indian
capitalist see no need to hide his fascist face. He is a 'baniya' first
and a capitalist second. The notions of welfare state and democracy
mean nothing to him. Only thing that matters is profit. And when the
state do not abet him in reaping profit ( which rarely happens), he
raises the slogan of merit.
The UPA government
in its common minimum program (CMP), did talk about reservation in private
sector. But the subsequent statements have significantly diluted the
stand. It seems that the government is afraid to raise another Mandal
wave. Remember, BJP rose to power on the wave of anti-mandal agitations.The
upper caste media, bureaucracy and corporates are sure to torpedo any
effort to introduce an effective legislation.
Thus the issue lies
in the very structure of Indian economy. In the Indian corporate sector
where upper caste interests ride supreme, it seems almost impossible
to implement an effective affirmative action program. The government,
in spite of being comprised predominantly of backward sections of society,
do not seem to have the will to teach the coporate section a lesson
in social responsibility.
So the issue lies
in the lack of corporate responsibility and the government's inability
to nurture it. But does that mean that the government is totally helpless
in pushing forward for an equitable representation of all sections of
the society in the private sector? Not at all. I propose that the government
should take a carrot and stick attitude towards the corporate. I'm sure
that they would fall in line. The government has a very potential instrument
in the form of corporate tax.
Private sector has
been demanding reduction of corporate tax from the present 35% to 30%
this year and 25% subsequently. The finance minister (who is a free
market apostle) also may be inclined to do the same. But if the same
can used to effectively educate and coerce private institutions to implement
affirmative action, that is the best bet to realize the goal of equitable
For example, see
this corporate strategy which may induce corporates to do what is required.
1)Abolish all other
2)Provide up to
5% tax reduction for corporates implementing affirmative action. A possible
matrix may read thus:
- For each 10% addition
of backward castes to total recruitment for the year, provide a tax
relief of 1%. For dalits, each 10% must attract 2% tax relief. The same
may be extended to women and other weak sections.
- Cap the tax relief
at 5% corresponding to 50% addition of backward castes per year. This
means a company recruiting at least half of its employees from backward
sections will be eligible for full 5% tax
3)Monitor the program
over a period of 5 years to ascertain the progress and introduce changes
If profit is the
main goal, then corporates should jump at this offer. If they are apprehensive
that merit shall be tampered with, they are free to abandon the 5% tax
cut. If they really believe merit is sparse in the 80% of Indian population,
they are free to recruit from the rest 20%. But I don't think they will.
The reason being merit is not so sparse among backward castes and the
profit they can reap is far more than any other considerations.
For example, think
of the case of Reliance Industries, which can save a massive 1000 crore
rupees per year if they implement the scheme. An Infosys can save more
than 100 core per year. Then it gives rise to the corporates pursuing
merit amongst backward sections, potently implementing affirmative action
on their own. I wonder if Mr. Narayana Murthy will sing the same tune
after this is enacted!.
I don't believe
this alone can solve all issues, but such a step will surely be in the
right direction ensuring much required involvement of vast section of
society in India's burgeoning private sector.