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Quick Take | Does the govt believe that more than 95% Indian households need job reservations?

Studies show that at least 95% of Indian households earn less than the government’s cut-off income of Rs 8 lakh

January 08, 2019 / 02:47 PM IST
Narendra Modi

Narendra Modi

The centre wants a quota of 10 percent for ‘economically weaker’ general category households for government jobs and admission to educational institutions.

The new quota is ostensibly for ‘economically weaker sections of the people who are not covered by any of the existing schemes of reservation’. The cut-off for economic weakness is a household income of less than Rs 8 lakh per annum, the same as the cut-off for reservations under the OBC (Other Backward Caste) category.

How many Indian households have annual income less than Rs 8 lakh?

The first inkling that this yardstick has little to do with helping the poor is seen from the Central Statistics Office’s first advance estimate of Gross Domestic Product, which projects per capita annual gross national income at Rs 1,03,633 for 2018-19.

Assuming a family of five, average household income in India would then be Rs 5,18,165. Since the average or mean is much higher than the median income, the threshold of Rs 8 lakh is very high.

What is the percentage of households that will be included? A 2017 paper by Thomas Piketty, the poster boy of research on inequality, may give us some clues.

The celebrated paper, titled ‘Indian income inequality, 1922-2015: From British Raj to Billionaire Raj?’ has a table which shows that the threshold annual income in 2015 for being in the top 10 percent incomes in India was Rs 1.95 lakh.

The threshold for being in the top 1% was Rs 13.03 lakh. It can safely be said, therefore, that the Rs 8 lakh cut-off will include somewhere between 90 to 99 percent of India’s households, very likely in excess of 95 percent.

Another estimate is offered by the central government’s Economic Survey of 2015-16. The survey says that taxpayers with gross taxable income of Rs 4 lakh and Rs 5 lakh were at the 97.3rd and 98.4th percentile of the income distribution respectively.

That means individuals having a gross taxable income of Rs 5 lakh and above constitute the top 1.6 percent. Going by these estimates, even if we consider that some households will have more than one earning member and that the upper castes have more well-off people, we could again easily say that at least 95% of households will be within the Rs 8 lakh cut-off limit.

What the proposed move tells us is that the Indian government believes that at least 95% of the people of this country fall in the ‘economically weaker’ sections and need job quotas.

Manas Chakravarty
Manas Chakravarty
first published: Jan 8, 2019 02:46 pm