With the election season around the corner, issues of caste have begun to re-emerge in the political arena. Most recently, Congress Vice President Rahul Gandhi called for the implementation of caste based reservations in the private sector. Previously, Mayawati and other politicians have made similar demands.

Unsurprisingly, the near unanimous reaction to this by commentators in the national media was that of dismissal. At the heart of the disdain for reservations are at least two broad arguments. The first argument is that individual freedoms and rights are curtailed when a skilled or ‘meritorious’ candidate is overlooked for someone who is selected merely on the basis of an identity that he or she did not ‘meritoriously’ acquire. The second argument is that the private sector values skills, efficiency and enterprise – irrespective of identities such as caste – and this implies that there is little scope for caste-based-discrimination in this sector. While the first argument has been debated at length in our media, the second argument has not had any or enough relevant discussions, even though it should ideally be the starting point of any discourse on reservations and other affirmative action.

Not many would argue that there is no caste-based discrimination in rural India, or that there was no such discrimination historically in India. The fact is that certain castes, such as the Dalits, have been socially excluded from full participation in the Indian society and economy over the past few centuries. There is documented evidence that in India’s villages, Dalits continue to be denied equal access to public and private goods such as water bodies, roads, land ownership, markets, financial institutions, and jobs. As a result, members belonging to such castes exhibit poor social indicators such as higher rates of poverty, lower literacy levels and higher infant mortality. However, that is rural India. What about modern, urban India? A casual glance at the matrimonial sections in our Sunday newspapers shows that caste plays a major role in our social spheres, but is there active discrimination in the modern private sector economy?

Since profits and efficiency are the guiding principles in a market economy, the claim is that only the most efficient workers are employed, leaving no room for discrimination on the basis of caste and other identities. For instance, in 2007, The Economist magazine claimed that “There is no strong evidence that companies discriminate against low-caste job applicants.”

However, such articles miss the research which does show that Dalits and other backward castes are in fact discriminated against even in the modern private sector. One of the more telling studies on such discrimination was conducted by economist Sukhdeo Thorat and his colleague K.S. Newman in 2005-06. They used the Randomized Control Trial (RCT) method to explore how job applications by highly educated Indians from various caste backgrounds are received by the modern urban private sector, including prominent Indian and multinational companies. The scholars collected advertisements for job openings from several national and regional newspapers including the Times of India, Hindustan Times, The Hindu, Deccan Chronicle and others. They chose only those openings which recent graduates would be eligible for, in sectors such as IT, pharma, finance, accounting, automobile, mass media, construction and banking. These advertisements were then responded to by submitting fake resumes which had identical educational qualifications and work experience. The resumes were all strong enough to be considered for hiring. The only thing that varied in these resumes was the name; some had so called “higher” caste sounding name, and some with “distinctively” Dalit names, as described by the researchers.

In all, 4808 applications were made for 548 job advertisements. The results were that an application with a Dalit name had only a 67% chance of being called for the second round as compared to the application of an equally qualified higher caste Hindu. The same study also revealed that Muslim-named applications had only a 33% chance of being accepted for the next round, when compared to an equally qualified high-caste-Hindu-named application. This isn’t the only such study conducted. A study in 2009 in Chennai showed that the lowest job application call-backs are received by Dalit women compared to other intersectional caste and gender identities. Another study in 2007 tracked students from three premier Indian universities as they went about applying for jobs. This study revealed that employers were “extremely conscious of the social identity (such as caste) of the applicant”, even as they claimed to only care for merit of the candidates.

Additionally, papers such as those by Surinder Jodhka in 2010 reveal that Dalit entrepreneurs face difficulties in starting up new ventures. Since private networks play a major role in attaining rent, credit and access to dealer networks, Dalit entrepreneurs suffer because of a lack of such a support system due to historical exclusion. This is especially true in the case of knowledge based industries, where entrepreneurs receive industry knowledge by those of their own caste and linguistic background.

None of this, of course, justifies private sector caste-based reservations on its own. That’s a different debate for a different time. However, that caste-based discrimination exists in the private sector must not be brushed aside by the narratives of efficiency and profit making. Various affirmative action and capacity building measures can be evolved over time (although hopefully with urgency), but at the very least, we must accept that caste identities are not as invisible as the invisible hand of the market.

The author is an economic analyst at Trusted Sources, an emerging markets consultancy.