Vantage point

Saturday, January 07, 2006

About Reservations in the Private Sector

Was going to write a long post on this once weekend brought some free time. Weekend is here, so as I sat down to write a post, I realised that much of what I wanted to say, has already been summed up eloquently in these two posts -

Reserving My Table by Arnab
The Great Leap Backward by Nitin Pai

Opposing the reservations should not be seen as a knee-jerk turf-protecting reaction by the upper castes. Even if we grant the premise that government policy has a role and a responsibility in ensuring the well-being of its most underprivileged citizens, this move makes bad sense from a policy point of view.

Economics is often said to be nothing but a science of understanding which are the incentives that will work and which are the incentives that will fail. Socio-economic policy needs an even more accurate understanding of incentives.

What intrigues me is that the government is hinting at the inevitability of much-needed labour reforms at the same time that it is hinting at the inevitability of reservations in the private sector.

That would mean the Prime Minister wants to say - You can hire and fire anyone at any time you long as you maintain the caste ratio.

So imagine a scenario where a factory owner decides to fire ABC because he reports late for work and is very lazy. If ABC, by chance, happens to be of a caste that falls under the reservations, then the factory owner will also have to fire XYZ who is from the "open category", just to maintain the caste ratio.