GD - 7 : Govt. should not impose job reservations on private sector


Private sector recently communicated to the government that it cannot reserve 5% of its jobs for Scheduled Caste/Scheduled Tribe persons. Industry Minister Anand Sharma had written to industry associations (CII, ASSOCHAM, FICCI) asking why the government should not make this mandatory. The government has also asked private sector companies to file quarterly report on number of jobs they have created for SCs, STs and other weaker sections, even as industry expressed its inability to reserve jobs for them. Earlier, private sector companies were required to file such reports annually.


1. Companies’ first commitment is to shareholders: Companies are responsible to their shareholders first who have entrusted their managements with their money in expectations of growth and returns on investments. Meeting social obligations out of shareholder money will be against corporate norms.

2. Reservations will mean compromise with merit: Those opposed to the idea feel such restrictions will affect corporate India’s efficiency. To be efficient, it is desirable that enterprises be allowed to hire the best available talent, regardless of the caste or class the latter may belong to, with the selection being based only on the suitability of the candidate for the job based on his or her qualifications, experience, and potential. This is as true for the private sector as it is for the public sector.

3. Private sector not obligated: It is not corporates’ job to meet the government’s political commitments. Today Private sector no longer depends on government favours for growth. In the pre-reforms period, the government gave Private sector all manner of protection in the form of high tariffs on imports and restrictions on FDI, so it could ask for favours in return.

4. Use tax revenues for social development: Private sector companies already pay over Rs 5 lakh crore every year in taxes to the government. This money is for the government to spend on meeting its social obligations of providing clean water, subsidised food and so on. Whatever the government needs has to be met from this fund. If the money is not enough, it needs to find more ways to raise money – taxing corporates at a higher rate sounds like the obvious solution, but past experience has shown that higher tax rates lead to lower tax collections.

5. If begun, could become the norm: Recruitment requirements of Private sector are huge and companies cannot do without hiring people from the social segments the government seems to be promoting. Around 25% of the country’s population is SC/ST, and another 40% OBC, industry just has to hire them. So why make this compulsory? Industry’s fear, and rightly so, is that once it agrees to a 5% reservation, the government can either hike it or start implementing this at various managerial grades as well.

6. Will scare off FDI: Any kind of reservation affects efficiency, which in turns adversely impacts growth. Indian talent has achieved recognition worldwide and many multinationals have been tapping this talent by setting up R&D centres in country for cutting edge research and product development. If foreign enterprises do not have the freedom to choose who they can hire and are forced to take in people just to fulfill quotas then they will not come to India as they cannot remain competitive and maintain quality.

7. Better ways to uplift weaker sections: The only way to improve the lot of weaker sections of society is to ensure SC/STs get greater education with the use, if need be, of more scholarships. Blindly implementing quotas and extending them to the private sector is not the appropriate solution.

8. Voluntary compliance exists: Many companies in the private sector are already “voluntarily implementing” the inclusive growth agenda of the government by giving preference to SCST candidates up to the managerial level posts. The private sector companies claim that they have been taking several initiatives for training and employment of the SCs and Sts from the weaker sections of the society. The CII has come out with several reports showing that quite a few of its member organisations have been working on affirmative action.

For instance, 55 per cent of the workforce in Hindustan Lever comprises people from the categories that the government wants to favour: those from the scheduled castes, scheduled tribes (SC/ST) and other backward castes (OBC). Similarly, about 24 per cent of those employed by Bajaj Auto are from these categories. Other companies, especially in the manufacturing sector, have similar records. And since this has happened in an open job market, there has been no dilution of standards that would lead to a loss of productivity or competitiveness.

9. Not possible in all sectors: The experience of HLL and Bajaj Auto shows that employing SC/ST/OBCs in the kind of numbers the government desires is possible. But this may not be true of companies in all sectors. Manufacturing companies like Lever and Bajaj will find it easier to hire from the weaker sections because they do not always need people on the shop floor or in support services to have a college education. In contrast, the Wipro chairman Azim Premji’s position is understandable when he comes out in opposition to reservations, because the majority of his employees are engineers -and the education system does not throw up enough engineers from the depressed castes. So selective implementation would be unfair to some sectors of the private sector.

10. Numbers just not available: If the government makes job reservations in the private sector compulsory, corporates like Premji may quite simply be unable to comply with the law. OBCs account for only 25.9 per cent of those finishing school, and 23.3 per cent of those finishing college - compared to their 52 per cent share of the population. The share is SCs/STs/OBCs passing out with professional degrees (medicine, engineering or management) is even lower.

11. Even public sector has failed to meet its quote obligations: Government records show that although formal job reservations have existed for the government and state-owned enterprises for more than half a century, almost no government department or company has been able to fulfil its quota obligations - because suitably qualified candidates from the reserved categories do not exist.

12. Difficult to implement: In many private companies, unlike in government, there are no standard categories of staff with common pay-scales or a formally sanctioned number of posts. Recruitment is done as and when necessary and the pay is fixed for each appointee based on his value to the company, his market value, what the company can afford, and so on. Applying the reservation policy in such a situation would be impossible (except, perhaps, for the low level jobs).

13. Private sector in help in other ways: The private sector can and does have an important role to play in uplifting the deprived classes, but this cannot be through job reservation. The private sector can contribute through greater public-private partnership in providing education and other amenities to the deprived classes, setting up of industrial or small-scale units with employment opportunities suitable for SCs and STs, among others. The government should concentrate on creating conditions that would allow the private sector to function in an efficient manner, and not create distortions in the name of correcting other discrepancies.


1. Part of government policy: Reserving jobs in private sector or affirmative action was part of the national Common Minimum Programme of UPA-I. At present, the law provides for reservation for Scheduled Castes and Scheduled Tribes, among others, in government and public sector jobs, besides quota in education.

2. Incentives given justify government’s demands: The government had asked the private sector to consider giving five per cent of the jobs to weaker sections wherever fiscal incentives are given. Industry gets a variety of fiscal sops which include export related duty credit, area specific income tax exemptions which are also extended on R&D budget of companies.

3. Lack of quota worsens social inequality: Supporters of job quotas say Indian democracy cannot afford inequality and needs equitable growth of all sections of society.

4. Public sector not creating enough jobs: Public sector has not been generating enough employment in recent times. Hence the weaker sections of the society must be accommodated in the private sector through quotas.

5. Privatisation has reduced job opportunities for weaker sections in public sector: Also increasing privatisation is leading to the loss of jobs reserved for such candidates in the public sector which are getting transferred to the private sector. Thus job reservation in the private sector holds out the promise of making up for the loss of present and future jobs reserved for the SC/STs in the public sector due to the downsizing and privatisation of government’s activities.