Modi Pushes Quotas Ahead of India Polls, But Where Are the Jobs?

(Bloomberg) -- India's ruling party, which promised to create 10 million jobs a year, looks a little nervous as it heads toward re-election.

With national polls just months away, Prime Minister Narendra Modi's administration is pledging to extend a 10 percent quota for government jobs and higher education places to groups including upper caste Hindus, who form the backbone of his support base.

The move, which requires a constitutional amendment, would extend a measure designed to correct historic discrimination among so-called lower castes. But the quota will be limited to people who earn as much as $11,500 per year -- roughly six times India's per capita income of about $1,950.

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The announcement comes after a number of setbacks for Modi's Bharatiya Janata Party ahead of the vote due by May. Stocks swung on Monday after the government estimated economic growth may be slower than forecast. While Modi's administration claims payroll data shows the creation and formalization of millions of jobs, private sector research suggests India is experiencing jobless growth and failing to create secure, high-quality employment. His effort to promise state jobs is a clear sign Modi is nervous about the upcoming general election, analysts say.

"These moves speak to India's broader employment problem," as well as the government's "concern about its prospects in this year's general election," said Sasha Riser-Kositsky, a senior analyst with Eurasia Group. Upper caste groups have pushed for quota reservations "only because they perceive a lack of opportunity elsewhere."

United Opposition

The new policy -- which was approved in the parliament on Wednesday -- grants benefits to communities long ignored by the opposition Congress party, which has ruled India for most of its independent history, BJP lawmaker and spokesman G.V.L. Narasimha Rao said. Modi's government continues to create millions of new employment opportunities, he added.

"This has nothing to do with any election," Rao said. "This government has been elected for a full term of five years and will continue to make all decisions in the public interest until the last day in office."

Still, the party has suffered numerous setbacks over the last month. The party lost three state elections to the opposition on Dec. 11, just one day after the country's central bank governor unexpectedly resigned following a high-profile spat with the government.

Things have continued to go badly. Two key regional parties decided over the weekend to unite against the BJP in Uttar Pradesh, a development that could significantly impact Modi's performance in India's most populous state. And on Tuesday, the Supreme Court overturned the federal government's separate decision to remove the chief of the country's top investigative agency before his term expired.

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Another factor generating anger among upper castes is the BJP's support for measures requiring the immediate arrest of anyone accused under a law to prevent atrocities against lower caste and Dalits.

“The upper castes are unhappy, because they thought this government was their government,” said Sanjay Kumar, director at the Centre for the Study of Developing Societies in New Delhi. “The BJP is trying its best to appease upper castes, to bring them back into the fold."

As the election approaches, the ruling party has realized its longer-term economic reform efforts are not improving the lives of many poorer Indians, which could force it to look at measures beyond the new quotas, said Sonal Varma, chief India economist at Nomura Holdings Inc. in Singapore.

"They're sort of in a fix," she said. "The risk is going to increase as we get into the elections."

To contact the reporter on this story: Iain Marlow in New Delhi at imarlow1@bloomberg.net

To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Unni Krishnan

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