Smarting from the flak it received on both scores, UPA politicians have socialized the idea of reservation in the private sector as a debating point grossly accentuated by the Government’s apparent lack of ability to take a position on new ideas on reservations. Even a pro-globalization politician like Commerce Minister Kamal Nath says that reservation in private sector will not affect foreign direct investment (FDI). It is not known on what scientific basis he has come to that conclusion or whether he believes that the cost of loss of FDI is worth the benefits of gaining more votes for himself and his party.
There is no argument in India that some sort of positive discrimination or reservation is required to broaden the benefits of economic development to the large below the poverty line population. What many analysts and thinkers object is the form that politicians are trying to make it happen. As it exists in India, the reservation policy is a failure because the only people who benefit are those who belong to the creamy layer of bureaucrats, politicians, and industrialists. One analyst pointed out that the same individual who gets admission in a well-known school will continue to get reservation in Government jobs, additional educational institutions, bank loans, and any other benefits the Government hands to him/her. Worse, his/her children will continue to gain access to these facilities denying the poor in their community a chance to proceed forward.
The nascent Business Process Outsourcing or Knowledge Process Outsourcing industry will be the most affected by such a policy. This is one industry that provides employment, training, and respectability to hundreds of thousands of unemployable but smart kids who graduate from Indian Universities with useless graduate degrees. With pressure on price from competing countries like China, Vietnam, Thailand, and Philippines, the emphasis is on quality that India has managed to learn and master. Already, the communists are seeking to unionize these employees and make them as inefficient as they have manufacturing labor. The added blow of reservation will rob the industry of key advantage to succeed.
All major corporate heads, industry associations, and corporate bodies have debunked the idea of reservation in private sector. The main opposition party Bharatiya Janata Party (BJP) is the first political party to oppose this idea, which has the potential to become policy. Industry would probably take the Government to court if it follows this policy further and overtly support the BJP. But there may be a bigger loss.
Many companies already feel that there is serious shortage of skilled labor in India and some are already looking to opening up offices in China to recruit employees to fuel their growth. Such ideas will not only drive MNCs from India but also Indian MNCs.