Dalit business owners experience income gap of 16% when compared to other disadvantaged groups, finds study

A file photo of the Indian Institute of Management Bangalore.
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Dalit business owners in India face a significant income gap of around 16% when compared to other structurally disadvantaged groups with similar attributes, according to a study.

‘It’s not who you know, but who you are: Explaining income gaps of stigmatized-caste business owners in India’, published in PLOS One journal on Wednesday, was authored by Prateek Raj, a faculty of the Indian Institute of Management Bangalore’s (IIMB) Department of Strategy, along with Thomas. J. Roulet from Judge Business School and King’s College, University of Cambridge, and Hari Bapuji from Department of Management and Marketing, University of Melbourne.  

The study uses data from the India Human Development Survey (IHDS) of 2011, a nationally representative survey that was a collaborative project between three universities in the U.S. and the National Council of Applied Economic Research (NCAER) of India. IHDS had surveyed 42,000 households in different demographic groups across 373 districts in India.

Caste and income disparity

The paper is the culmination of Prof. Raj’s research into caste and income disparity, which he began in 2019. The study examined if caste identities have a direct impact on business incomes and found that even when compared with business owners of other disadvantaged groups like OBCs, STs, and Muslims, Dalits, who are institutionally stigmatised, have higher income gaps.

The study describes “institutional stigma” involving negative public perceptions about and adverse expectations from social groups who get devalued in a particular social context.

“Dalit business owners face unique stigma-related disadvantages that cannot be equated with other forms of identity-based challenges, such as gender, race, or ethnicity,” Prof. Raj said.  

The study also notes that even with higher levels of social capital, the income gap for Dalit business owners not only persists, but rather increases when compared with other groups. The size of the social capital of the households was indicated by the number of personal acquaintances they had across professions of 10 categories (including elected officers, government employees, doctors and teachers).

The study showed that a standard deviation increase in social capital resulted in a 17.3% increase in business income for households from non-stigmatised communities, but a similar increase in social capital results in only a 6% increase in business income for Dalit households.  

The authors have argued that this phenomenon is rooted in the deep-seated stigma attached to Dalit identity, hindering their ability to fully leverage social networks for business success. 

Human capital matters

However, human capital (for which educational level is usually an indicator) benefits both Dalits and other marginalised communities comparably. One standard deviation increase in human capital showed an increase of 16.1% in business income for both groups.

“Education, unlike social capital, is associated with higher income for Dalits just as much as non-Dalits. This implies that if the education of Dalits was at par with others, it would be associated with higher incomes. Education helps everyone, unlike social capital. Higher social capital is not associated with higher income for Dalits, unlike others,” Prof. Raj told The Hindu. 

He also said: “We need economic systems that are fair, where success is not determined by one’s born identity. It is necessary to better understand the underlying processes of the discrimination faced by Dalit communities and address those with targeted interventions.”

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