Caste and capitalism


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THE dominant stream of social science theories tend to suggest that processes of modernization or capitalist development will automatically undermine the significance of social identities and their role in affecting economic outcomes. The neoclassical school of economics, for example, points out that social identities restrict market competition, impede institutional change, raise transaction costs and make the markets non-competitive. Market driven economies, thus, would undermine ascription-based social identities. New institutional economics though does recognize the role of informal institutions – religion, norms, customs, traditions etc.; historical evidence seems to suggest the imperative of impersonal/formal institutions for lowering transaction costs and hence promoting competition, which in turn can lead to growth.1

Thus, capitalism as an economic system is expected to usher in a particular kind of market rationality where the role of social identities gradually becomes insignificant. In other words, market outcomes will primarily be shaped at the intersection of demand and supply while secular and formal institutions will regulate the markets in order to avoid any market exigencies.

In the Indian context, several scholars writing on the relationship between caste and market economy agree with the overall underpinnings of neoclassical and new institutional economics, that is, markets have the capacity to marginalize the influence of social identities in shaping market outcomes.2 Markets have also acquired prominence because political democracy (equality through a constitutional guarantee based on the liberal principle of citizenship – one person one vote irrespective of social location) has not met the hopes for economic prosperity.


It is against this backdrop that this paper attempts to analyze the outcome of the political and economic desire on the part of Dalits to enter the market as owners of capital and trade in various goods and services, based on 90 detailed interviews with Dalit entrepreneurs conducted in 13 districts located in six states of India.3 Though these business people were perceived by their immediate community to be successful, many of them saw themselves at the margins of the class of peers among whom they work, earn their living and survive. The business history of Dalit entrepreneurs was reconstructed to understand how market exchange involving them is affected by history, social institutions, collective behaviour or anything else that lies outside the realm of a narrow market exchange.

Type of Economic Ventures

(percentages in parentheses)

Caste related

26 (29)

Earlier restricted and

considered taboo


12 (13)


36 (40)

Liberalized market

11 (12)


5 (6)


90 (100)

The accompanying table shows the number of businesses in the sample by general economic type. We have classified businesses into five types. The first covers economic ventures inspired by caste location. These include trade in sanitary ware, bulk washing of clothes, washing clothes for garment industry, sanitary labour and housekeeping contractors, leather work, hair-cutting saloons, etc. Nearly one-fifth of our respondents entered the market for goods and services associated with their specific sub-castes. The second type relates to trade in goods and services earlier disallowed to Dalits by the Hindu social order. Only 13% of business persons entered the market for such goods and services, which include educational coaching, trade in food and food products, priesthood, etc. Nearly two-fifths of business people are found in the third category, which we have termed general economic ventures. These include smaller economic ventures like trade in wood and fuelwood, handloom material, grocery shops etc., as well as big businesses like mining, construction and real estate, production and sale of ceramic ware, and so on.


Our fourth category covers the many newer avenues for business which have been created by the opening up of markets and the ongoing integration of the Indian economy with the global economy. These include, among others, trade in communication, electronics and computers, and real estate. Only 12% of the total interviewees were involved in this particular category. Finally, our fifth category covers economic avenues, participation in which is contingent on higher education, specialized training and professional degrees. These include economic activities related to medicine and hospital services. We find that such high skilled and technically qualified business persons constitute a little less than 6% of the total Dalit business persons interviewed.

Discrimination is generally understood as differential treatment of individuals in similar situations. With the rapid transformation of sociopolitical structures, the sociological norms of purity and pollution defining the relationship between different castes have changed substantially. Yet, although the norms have acquired new form, the content remains the same – the retention of unequal and hierarchical power relationships between the upper castes and Dalits. In the context of market relationships, the social relationship between the Dalits and upper castes continues to be shaped by social prejudice against Dalits which is strategically invoked and executed to meet the demands of market competition. The business histories of Dalit business persons indicate that the actual nature of discrimination faced varies in different sectors of the market and often assumes different forms.


As noted earlier, nearly one-fifth of Dalit business persons in our survey were trading in goods and services, activities which were inspired by their caste location. They earlier worked in a different capacity, offering their labour services to the upper caste owners. Their entry into the markets as owners of capital was treated with contempt by the former employers. One common entry barrier created by the former employers and other market peers involved erecting roadblocks in hiring labour to carry out economic activity. The labourers too, as a group, seem to have gone along with the designs of upper caste business persons, possibly because their own chances of finding work are mostly controlled by the former.

Second, most Dalit business persons faced immense difficulty in securing initial orders for their business. This is generally true for both sanitary and leather business where the market is controlled by the upper castes. In the case of leather goods, most Dalit entrepreneurs seem to have lost out to big capital and are mostly producing goods on a piece-rate arrangement.


Dalits trading as wholesalers and retailers in the food and beverage business are compelled to supply goods at lower prices. If they refused, the upper caste retailers would invoke their caste identity and reject the produce. As retailers, they get credit for a shorter period while procuring food items from the wholesalers. Similarly, Dalits often face negative publicity by their business competitors with regard to their ‘impure’ caste status when trying to attract customers to their own joints. In a few cases, the Dalit owner even had to shift the food establishment to a Dalit locality because of an inability to attract clients from a predominantly upper caste area.

In the category of ‘general business’ and the new sectors which have emerged due to the opening up of the markets, Dalits efforts were hampered by a lack of access to the state’s resources. The biggest handicap was their lack of access to social networks that are controlled by the upper castes who regulate the informal credit market. Short-term informal credit critically influences the success/failure of any business. Dalit business persons are denied access to these informal networks. Even when they succeeded in accessing informal credit, the rate of interest was much higher than the prevailing market rate. The lack of informal credit or being forced to arrange informal credit at high interest rates, disempowered them to meet the deadlines of lucrative contracts which may have helped to scale up their business endeavours to a higher level. Last but not least, Dalits are unable to rent or buy a strategically important physical space for their business due to opposition from upper caste business competitors.

The final category of business, which we have termed as ‘specialized’, involves Dalits whose earlier generation had managed to improve its economic status as a result of affirmative action policies of the state. They thus had both the required skills and initial capital to enter into the business as well as sustain themselves. However, all the respondents noted the subtle experience of caste prejudice, claiming that they were not given equal importance which their upper caste peers commanded. In other words, high class status does not necessarily translate into high social status because of their lower caste.


Any kind of economic activity is critically influenced by the policies of the state. The role of the modern state is crucial because it both establishes and legitimizes property rights and governance structures (including labour laws and taxation), regulates credit availability, and also creates and maintains infrastructure (electricity, water, roads, etc.). Dalit entrepreneurs invariably experienced an adverse reaction by the state officials whenever they tried to access the state’s resources. In their view, state resources can only be accessed through social networks. They understand social networks as a critical social resource which could enable them to cultivate a relationship with state officials in order to get favourable treatment to enhance their business ventures.

For instance, many of the Dalit entrepreneurs were denied credit because they were not considered capable enough to run modern business. They were told by officials that they should not waste the state’s precious resources because their business was ‘destined’ to fail and instead they should stick to their traditional professions. Dalit entrepreneurs elaborated at length on how kith and kin networks of upper castes, formed through family contacts and marriage relationships, enabled them to access the resources of the state more easily than they could ever manage. The state resources that facilitate upper caste business endeavours range from getting government contracts, to ensuring payment of lower sales tax/cess, to flouting municipal laws with ease and without any fear of penalty.


One way to access the state’s resources/officials is through paying bribes. In their view, rent seeking by state officials is rampant and affects every business person, irrespective of caste location. However, what most troubles Dalit business persons is that upper caste business persons, because of their social network, have to pay a lower bribe than they have to. This both reduces the transaction costs of the upper castes and helps them generate a higher surplus. Moreover, Dalit business persons feel that the upper castes have the ability to repeatedly access state resources, which seems to be a remote possibility for them.

A telling example of the role of social networks in accessing state resources is drawn from Madhya Pradesh.4 The state government had explicitly notified that a specified percentage of total government procurement had to be sourced from Dalit enterprises. Despite being given this exclusive space to do business and earn profit, Dalit entrepreneurs found it difficult to get their payment released. Therefore, many of them had to informally involve upper caste persons as business partners, whose role is to ensure timely release of payments. In other words, the use of social networks to access the state resources enables upper castes to earn money without investing capital in the business, while a lack of the same substantially increases the transaction costs for Dalits.

In several instances, we were told that deliberate inaction by state officials under the influence of upper caste business competitors increased the transaction cost for Dalits. For instance, licenses were not granted to a Dalit brick kiln owner and leather goods trader in Pune and Agra respectively, due to the influence of an upper caste business competitor. Many Dalit entrepreneurs also informed us that Dalits are often forced to withdraw from the market because of real or potential threat of violence by the dominant caste business competitors. State inaction, in such instances, is more palpable because the law and order machinery routinely refuses to register a first information report.


As is evident from the above discussion, Dalit owners of capital experience what Sen describes as ‘unfavourable inclusion’5 in market processes, though the degree of adversity varies with location and sector of the markets. In other words, access to market spaces for Dalits as owners of capital is neither entirely blocked (markets having absolutely rigid entry barriers for Dalits), nor are avenues provided for complete integration as equal players (markets being completely accommodative to entry of Dalit entrepreneur). Further, the tendency of market processes towards absolute rigidity or complete accommodation is not only decided by market processes, but equally by the balance of institutional forces in the wider socio-economic and political realms. In other words, if Dalit business persons experience an unfavourable inclusion in markets processes, duly influenced by the state’s (in)action, the roots lie in the realm of civil society.


It is in the realm of civil society that the ideological architecture of caste relationships are invoked and sustained. It is in the realm of civil society where the resources of social networks are drawn to help business endeavours of upper castes. Again, it is in the realm of civil society where actual and threat of violence against Dalits is carried out. Therefore, it is important that we understand civil society not only as a site of democratization. Following the traditional theorists of civil society – Locke, Adam Smith, Hegel, Marx and Gramsci – civil society should also be seen as a site of accumulation. It is in this context that caste must be seen as a specific form of Indian civil society6 because on the one hand, caste influences the state (social networks) and on the other, plays an important role in influencing market outcomes through controlling credit, organizing labour and regulating supply and procurement.


In the course of our empirical investigation to reconstruct the business history of 90 Dalit entrepreneurs, we have tried to explore whether, and to what degree, market outcomes are affected by their ascriptive group identity. Overall, while Dalits are able to enter the markets as owners of capital, they, at the same time, experience numerous forms of discrimination leading to unfavourable inclusion in market processes. We argue that multiple forms of discrimination practised against Dalits are developed and sustained at the intersection of state, market and civil society.

The thesis of intersectionality challenges the existing dominant conceptualization of somewhat rigid analytical boundaries between these institutions – state, market and civil society. It argues in favour of blurred boundaries and the consequent overlapping space which is instrumental in (re)reproducing discrimination/unfavourable inclusion. The intersectional spaces and experiences, though originating in the realm of state, markets and society, on intersecting and interacting, transcend their original character and assume a unique characteristic with its own set of norms, rules and behavioural patterns, different and contradictory to the assumed rationalities of state planning and markets.

Thus, outcomes in the markets are governed not only by formal economic institutions present in the markets and state, but also influenced by social institutions, collective behaviour and social values shaped by the ideology of caste. However, the very meaning of the term intersectionality also denotes that there are spaces outside and beyond the intersection which may not be resulting in discriminatory social practices against one or more social groups.


* The paper is part of a larger project which draws upon the intellectual thoughts of Professor Barbara Harriss-White.


1. For a discussion on neo-institutional economics see Aseem Prakash, ‘Dalit Entrepreneurs in Middle India’, in Judith Heyer and Barbara Harriss-White (eds.), The Comparative Political Economy of Development; Africa and South Asia. Routledge, London, 2010.

2. Gail Omvedt, ‘Globalization and Indian Tradition’, available at http://www.ambedkar. org/News/Globalisation.htm , site visited 19 March 2012; Chandra Bhan Prasad, ‘Markets and Manu: Economic Reforms and its Impact on Caste in India’, CASI Working Paper Series, No. 08-01, Center For The Advanced Study of India, University of Pennsylvania, January 2008; A. Ramaiah, ‘Dalits to Accept Globalization: Lessons From the Past and Present’, mimeo., Tata Institute of Social Sciences, Mumbai, 2004, available at SSRN:, site visited 19 March 2012.

3. Madhya Pradesh – Bhopal, Hoshangabad, Raisen, Vidisha; Gujarat – Ahmedabad; Maharashtra – Aurangabad, Mumbai, Pune; Rajasthan – Jaipur; Uttar Pradesh – Agra, Kanpur and Lucknow; West Bengal – Hoogly, 24 Parganas. Earlier, Jodhka had studied the efforts of Dalits to do business in North Western India. See Surinder S. Jodhka, ‘Dalits in Business: Self-Employed Scheduled Castes in North-West India’, Economic and Political Weekly 45(11), 13 March-19 March 2010.

4. Sudha Pai has also studied the efforts of Dalits to take advantage of the Madhya Pradesh government’s scheme to help Dalits to start their own business through guaranteed state procurement and credit facility. See Sudha Pai, Developmental State and the Dalit Question in Madhya Pradesh: Congress Response. Routledge, New Delhi, 2012.

5. Amartya Sen ‘Social Exclusion: Concepts, Applications and Scrutiny’, Social Development Papers No. 1, Asian Development Bank, available at exclusion.pdf, website visited on 19 March 2012.

6. The thesis – caste as an Indian form of civil society – is supported by other authors too. For instance, see Nicholas B. Dirks, ‘Castes of Mind’, Representations 37 (special issue: Imperial Fantasies and Postcolonial Histories), Winter 1992, pp. 56-78; T.K. Oommen, ‘Civil Society: Religion, Caste and Language in India’, Sociological Bulletin 50(2), September 2001, pp. 219-235; Satish Saberwal, ‘Democacy and Civil Society in India: Integral or Accidental’, Sociological Bulletin 50(2), September 2001, pp. 193-205.