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Entrepreneurship or survival? Caste and gender of small business in India

  • Blog Post Date 23 September, 2013
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Can entrepreneurship be a vehicle for social mobility in India? This column analyses data from micro, small and medium enterprises, and finds clear and persistent caste and gender disparities in virtually all enterprise characteristics in the sector. It makes a case for concerted policy action to correct historical caste-based inequalities.

On Republic Day this year, two billionaires, Kalpana Saroj and Milind Kamble, featured among the Padma Awardees, the nation’s highest civilian honours. The award was less a celebration of material wealth and more of human triumph over adversity, as these two awardees rose from a life of crushing poverty and marginalisation, and against all odds, achieved unprecedented success. They are members of the Dalit Indian Chamber of Commerce and Industry (DICCI), founded on April 14, 2005, the birth anniversary of Dr B. R. Ambedkar, acknowledged by the DICCI as their "messiah and the intellectual father". Interestingly, while Ambedkar was responsible for making compensatory discrimination for Dalits1 mandatory through constitutionally guaranteed quotas in government jobs, the DICCI group rejects job reservation as a means to Dalit emancipation, as they feel quotas have added yet another (negative) stereotype to the Dalits, seen as they are as “the State’s Jamais” (sons-in-law of the State). Instead of depending on the State to provide Dalits decent jobs, the DICCI has adopted as its mission statement “be job givers, not job seekers”, exhorting members of the Dalit community in India to become entrepreneurs2.

The DICCI focuses on entrepreneurship, as it believes that “Dalit Capitalism” will help Dalits rise to the top of the social pyramid, and will pave the way for the end of the caste system. However, in order to understand the spread of “Dalit Capitalism” it is not enough to focus on the top end of Dalit businesses (the Dalit billionaires), but instead, to investigate the extent and spread of Dalit participation in small businesses, which more accurately reflects the material conditions of millions of Dalits who are not in wage employment. In 2004-2005, according to the National Sample Survey (NSS), in rural India, 34% of Scheduled Caste (SC) and 46% of Scheduled Tribe (ST) households were in self-employment (with corresponding urban proportions being 29 and 26). We use unit-level data from the registered manufacturing segment of the Third and Fourth rounds of the Indian Micro, Small and Medium Enterprises (MSME) census for 2001-2002 and 2006-2007 respectively, to understand the changes in involvement of Dalits, Adivasis3 and women, in this sector (Deshpande and Sharma 2013). Our work confirms several existing findings, but significantly expands the state of knowledge on this subject by, one, examining how the caste mix of employees varies by the caste of the owner, which enables us to assess the extent of homophily (or more appropriately, status homophily4 ), which is the affinity of owners to hire employees from their own caste groups; two, by examining the gender-caste overlap to understand how gender mediates disparities both across and within caste groups; three, by estimating growth rates and their determinants, including the effect of caste and gender of owner.

Caste and gender of enterprise owners

The average age of a registered manufacturing enterprise in the MSME sector is 13 years. 45% of units are rural. There are clear and sharp disparities in ownership by caste. The Other Backward Classes (OBC) share in enterprise ownership is roughly equal to their share in the population (41.2%), whereas SCs and STs (at 19.7% and 8.4% of the national population) are significantly under-represented. The under-representation of these two groups is mirrored in the over-representation of “Others” and Hindu upper castes (non-SC-ST-OBC Hindus) which comprised 30.7 and 21.6% of the population respectively in 2004-2005. Over the two censuses, we find an increase in caste disparity in ownership of manufacturing enterprises: decline in proportions owned by SCs and STs (at 6 and 3% respectively in 2006-2007)5, and a corresponding increase in proportions owned by OBCs and “Others” (at 40 and 50% respectively).

Gender disparities in ownership are sharper, but show a reduction over the two rounds. Female-ownership (enterprises where 51% of share capital belongs to a woman) increased from 11.32% in 2001-2002 to 14.7% in 2006-2007, whereas female-managed units increased from 9.56 to 11.54%. Note that all female-managed enterprises are not female-owned: in 2006-2007, 88% of female-managed enterprises were female-owned, but only 69% of female-owned firms were female-managed. Both female-management and female-ownership is higher in rural than in urban areas. This might seem paradoxical at first glance, but it is useful to recall that labour force participation rates (LFPRs) for women also exhibit the same pattern in that rural female LFPRs are higher than urban.

How is production differentiated by caste and gender?

The top five activities, which collectively account for roughly 62% of all registered manufacturing MSMEs, are food products and beverages, apparel, fabricated metal products, furniture and textiles. This overall picture changes somewhat when we differentiate by caste of the owner. Activities dealing with leather – tanning and dressing of leather, manufacture of luggage and footwear – stigmatising jobs traditionally associated with one of the Dalit castes, are the most important activity for SC manufacturing and these do not appear in the top five activities of any other caste group. However, over the period, the proportion of SC-owned enterprises engaged in leather has shown a decline. Also, leather forms a larger share of urban SC-owned units, compared to rural.

The stigma of untouchability has traditionally kept Dalits out of food-related industries. We find that the proportion of SC-owned firms in food products and beverages is significantly lower than the national average, and that of all other caste groups. However, over the period, this proportion has increased both in rural and urban areas, and again, proportions are smaller in urban areas compared to rural. To the extent that Dalit participation in leather and exclusion from food are indicators of traditional caste practices, we find some evidence of loosening of these ties, but find that these practices more strongly entrenched in urban compared to rural areas, which is an enigma.

Entrepreneurship or survival?

The majority of the MSME workforce is employed in non-SC-ST owned firms. Also, there is evidence of homophily in OBC and upper-caste-owned firms. Thus, the MSME sector, as it stands today, is not a major vehicle for job creation for the Dalits. While it is significant that there is now an emerging section of Dalit entrepreneurs who could be job-givers, we should note that most Dalit businesses occupy a very different place in the production chain. They are engaged in the bottom-of-the-ladder, low productivity, survival activities, as can be seen from their lower rate of growth, after controlling for other characteristics.

In India, certain castes and communities have traditionally been business communities, and entrepreneurs from these communities start with clear natural advantages in that they possess insider knowledge, know-how and strong business networks passed down through the generations (Damodaran 2008). In this context, an important channel of social mobility would be the extent to which marginalised groups, whose traditional occupations have not been business-based, have been able to break into established networks and establish themselves as entrepreneurs. While this dataset does not have detailed and specific jati (caste) information, the evidence suggests that entrepreneurship as a significant vehicle for social mobility for Dalits is yet to become a reality for India.

In a recent op-ed piece, Chandra Bhan Prasad and Milind Kamble6 (2013) argue that “capital is the surest means to fight caste. In Dalits’ hands, capital becomes an anti-caste weapon…Dalit capitalism is the answer to that regime of discrimination”. We believe that the best site to test the validity of this proposition is the private manufacturing sector. Our analysis of changes in the private manufacturing sector in the era of market-led and globalised development finds that caste continues to shape virtually all aspects of production, and capital, so far, is not countering the deep-rooted inequities produced by caste.

The Indian state is often berated for creating casteism through reservations, the implicit argument being that outcomes are not mediated by caste when the state doesn’t intervene to change the caste-mix of institutions. Until April 2012, there was no systematic policy of compensatory discrimination in the sphere of small business activity, so the outcomes we report could not possibly be caused by state intervention. On the contrary, this picture clearly indicates the need for concerted policy to correct historical caste-based inequalities. The “supplier diversity” initiative of the Madhya Pradesh government in 2002 was one such beginning, but the focus there was on government procurement from SC-ST suppliers. The “Public Procurement Policy for MSEs” of 2012 mandates that central government ministries, departments and public sector undertakings should procure minimum of 20% of their annual value of goods or services from MSEs and within this, 20% should be earmarked for SC-ST-owned MSEs, which means total 4% of the total. Lest we think of this as too radical, note that the Malaysian affirmative action programme directly seeks to redress wealth disparities between Malays and the Chinese by reserving 30% of all business ownership to ethnic Malays. The policy of the Indian government is considerably weaker. While we debate the efficiency and efficacy of this policy, we have to be mindful that altering the no-intervention status quo in the private sector would not introduce disparities, but correct them.


  1. Dalit, meaning ‘oppressed’, is a term of pride used by formerly untouchable castes, lowest in the caste hierarchy, officially known as Scheduled Castes.
  2., accessed October 31, 2012
  3. Adivasis, meaning indigenous inhabitants, is a term used to refer to the tribal population in India.
  4. Status homophily refers to a phenomenon where the similarity is based on informal, formal or ascribed status, like race, ethnicity, sex, or age, and acquired characteristics like religion, education, occupation, or behaviour patterns.
  5. These are not very different from the proportions in the unregistered sector: SCs and STs own 7.89 and 3.18% respectively, while OBCs and “Others” own 40.31 and 43.48% respectively.
  6. One of the Padma Awardee

Further Reading

  • Damodaran, Harish (2008), India´s New Capitalists: Caste, Business and Industry in a Modern Nation, Palgrave Macmillan.
  • Deshpande, Ashwini and Smriti Sharma (2013), “Entrepreneurship or Survival? Caste and Gender of Small Business in India”, Economic and Political Weekly, Vol. XLVIII, No. 28, pp. 38-49, July 13, 2013.
  • Prasad, Chandra Bhan and Milind Kamble (2013), ‘Manifesto to End Caste: Push Capitalism and Industrialization to Eradicate this Pernicious System’, Times of India, 23 January (
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