Designing Growth When Caste Shapes Who Advances

Ashmita Gupta: Asian Development Research Institute (ADRI)

Neha Hui: University of Reading

SDG 8: Decent Work and Economic Growth | SDG 10: Reduced Inequalities
Ministry of Labour and Employment | Ministry of Education | Ministry of Commerce and Industry

India’s economic liberalisation of the 1990s – a period marked by trade opening, deregulation, and a sharp reduction in state protection for domestic industry – is often celebrated for what it delivered: efficiency gains, global competitiveness, and faster growth.

But when the lens shifts from the “average worker” to Dalit workers in rural India, the liberalisation story looks markedly different. Dalits have historically been concentrated in manual and stigmatised occupations, with limited access to higher education, formal employment, and social capital. Liberalisation unfolded on this unequal starting ground, reinforcing old patterns while narrowing access to upward occupational mobility.

Liberalisation did not exclude them from work; it excluded them from advancement.

Taxes imposed on imported goods to shield domestic producers from foreign competition – were a central instrument of India’s pre-1990s industrial policy. By insulating domestic firms from external competition, these tariffs shaped where production was located, which industries expanded, and the kinds of jobs they sustained. Liberalisation therefore arrived as a sharp economic shock: average tariffs fell from roughly 150 percent in the late 1980s to about 50 percent by the end of the decade, with the deepest cuts in industries that had previously enjoyed the highest protection.

Because tariff reductions were applied uniformly at the national level but varied sharply by industry, districts differed in how intensely they were exposed to liberalisation based on their pre-reform industrial structure. Dalit and non-Dalit workers within the same districts therefore faced the same local shock, even as the intensity of exposure varied across districts.

Against this common exposure, the aggregate employment effects of the liberalisation appear benign: Dalit employment rose slightly relative to non-Dalits in districts more exposed to tariff cuts. The gains, however, were modest: a 10 percentage point reduction in tariffs raised Dalit employment probability by only about 0.15 percentage points. The more important story lies beneath this aggregate number – in the kinds of jobs that absorbed this employment.

In districts experiencing larger tariff reductions, Dalits became more concentrated in agriculture, while their relative presence in trade and services declined. This shift matters because trade and services have historically been more dynamic sources of income growth and occupational mobility than agriculture.

Patterns in job quality reinforce this pattern of exclusion. In districts more exposed to tariff cuts, Dalits became significantly less likely than non-Dalits to access the upper tiers of the labour market. This exclusion is visible across multiple dimensions: entry into the top quarter of skill-intensive occupations, access to the highest wage brackets, and participation in non-routine cognitive roles such as professional, technical, administrative, and managerial jobs.

Dalits accounted for well under one percent of workers in top-wage occupations to begin with. A 10-point tariff reduction reduced Dalit access to these jobs by roughly 25–30 percent relative to the already low Dalit mean, effectively tightening an already narrow gate. At the other end of the distribution, this exclusion was mirrored by growing concentration in low-wage, low-prestige occupations. They were also more likely to be pushed into forms of self-employment associated with insecurity rather than entrepreneurship.

Exposure to trade reductions was also associated with improvements in basic literacy among Dalits, suggesting responsiveness to changing labour market signals. But these gains stopped at the bottom. A 10-point reduction in tariffs was associated with roughly a 9 percent relative decline in Dalit higher-education attainment, off an already very low base (around 1 percent). In other words, liberalisation coincided with improvements in foundational skills among Dalits but did not expand access to the tertiary education required for high-skill, high-prestige jobs.

Importantly, the adverse effect of trade exposure on Dalit access to skilled and prestigious occupations largely operated through educational attainment. As liberalisation shifted opportunities toward skill-intensive jobs, persistent barriers to higher education prevented them from accessing the occupations that expanded with openness. The result was not exclusion from the labour market, but exclusion from its most upwardly mobile segments.

Labour regulation adds another layer. Indian states differ in how strictly employment protection laws are implemented. The effects of tariff cuts are more pronounced in states with more flexible, pro-employer labour regimes than in those with stricter enforcement.

In these states, tariff reductions are associated with larger relative declines in Dalit access to top-wage and high-skill occupations, and larger increases in low-prestige employment. Where employers have greater discretion to hire and fire, and where enforcement of safeguards is weaker, underlying social hierarchies play a stronger role over who is retained in good jobs and who is pushed out. This does not imply that labour-market flexibility alone drives exclusion; rather, it conditions how trade shocks are transmitted through socially stratified labour markets.

India’s next phase of development will be shaped less by across-the-board trade opening and more by targeted industrial strategies, skill-intensive growth, and private-sector-led job creation. What this experience from the 1990s – particularly for Dalit workers – makes clear is that the distribution of opportunity in such transitions is decided well before jobs are created – through who can acquire the education, credentials, and protections required to access them. Growth strategies that expand high-productivity sectors without simultaneously widening access to higher education risk reproducing occupational hierarchies even as aggregate employment rises.

The same logic applies to labour-market design. Adjustment to global competition will continue to require flexibility, but flexibility without credible safeguards undermines inclusion. For Dalit workers, the absence of such safeguards means that new opportunities created by growth are filtered through old hierarchies rather than dismantling them. In labour markets marked by deep social stratification, the question is less about markets allocating jobs efficiently, and more about institutional design preventing inherited disadvantage.

Markets can generate opportunity at scale; only institutions decide who is able to reach it.

The discussion in this article is based on the authors’ working paper on the subject. Views are personal.