Gujarat protests are expressing a wider discontent.

Sam Panthaky/AFP/Getty Images

Modi's Got More Than a Patel Problem

Dhiraj Nayyar is a journalist in New Delhi. Trained as an economist, he has worked at the Financial Express, India Today and Firstpost.com. He is editor of "Surviving the Storm: India and the Global Financial Crisis."
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For the last few days, an extraordinary political tumult has wracked the western Indian state of Gujarat, home of Prime Minister Narendra Modi. An influential community -- the Patidar caste, more commonly known as Patels because of the last name many hold -- has rallied behind 22-year-old firebrand Hardik Patel to demand guaranteed places ("reservations") in the government bureaucracy and educational institutions. Patel's temporary arrest earlier in the week set off riots; the army has since practically shut down several major cities. The movement should worry Modi deeply -- and not only because of the violence.

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India has a long list of disadvantaged caste and community groups, and an equally long history of demands for affirmative action. The country's 1950 constitution specifically granted reservations to scheduled castes (formerly the "untouchable" Hindu castes) and scheduled tribes. The Patels, however, are hardly underprivileged. They comprise roughly 20 percent of Gujarat’s population; many are hugely prosperous landowners and businessmen. In the U.S., Patel immigrants are well-known and successful in the motel business among others. They're also politically powerful at home -- four Patels have led Gujarat as chief minister, including the incumbent Anandiben Patel. They're no one's idea of a deprived community.

Moreover, protests such as this week's agitation should've faded after India abandoned an insular socialism for the path of economic liberalization in 1991. Interestingly enough, the biggest churning in favor of broader affirmative action took place in the late 1980s and early 1990s (at the tail end of India’s tryst with socialism) when a large number of historically underprivileged castes (known as "other backward classes," or OBCs) were granted extensive reservations in government jobs. The opening up of the economy since then should in theory have expanded opportunities for everyone. Gujarat in particular, under Modi and others, has grown at a rate faster than the Indian average and in double digits for around seven years between 2004-05 and 2011-12.

The Patels' anger, though, shows that much more needs to be done to expand the size of the proverbial cake in India. Modi seemed to understand this when he took office 15 months ago after ten years of a government that was more focused on redistribution than growth. Unfortunately, his attempts at growing India’s economy and increasing opportunities have been incremental, not radical.

His government’s record in upgrading India’s education system in particular is dismal: There's been no reform at all. Most of India’s best institutions are funded by the state -- whether the Indian Institutes of Technology, Indian Institutes of Management or top universities in Delhi and Mumbai. Governments of whatever political persuasion have taken that as a license to interfere in the running of these institutions, compromising their quality. At the same time, the government doesn't have the money to create new, quality institutions. And a complex net of socialist-era regulations continues to deter the growth of private-sector schools and universities. While foreign investment has been liberalized in other sectors of the economy, foreign universities aren't permitted to set up campuses in India.

Although Patels have generally done well in business, most remain small entrepreneurs or farmers subject to the vagaries of the broader economy. Government jobs -- half of which are already committed to members of various disadvantaged groups -- are attractive for their greater stability and in some cases, prestige. As long as that remains the case, demands similar to the Patels' will only surface again and again.

There's little point in redistributing by force, or decree, limited opportunities. The only solution is the one Modi promised during his campaign: radical action to grow the economy and create more attractive employment and education opportunities for the millions of youth entering the job market every month. Yet so far he's shown little willingness to privatize an inefficient public sector, and little ability to tackle fundamental land and labor reforms. Patel anger is a sign of how frustrated those younger Indians are growing with the pace of change. Already a quarter of the way into his five-year term, Modi would be wise to heed them.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Dhiraj Nayyar at dhiraj.nayyar@gmail.com

To contact the editor on this story:
Nisid Hajari at nhajari@bloomberg.net