High ‘creamy layer’ cut-off hurts the poor the most: Proposed Rs 12-lakh cut-off for OBCs is too high

This is quite worrying and, ideally, should not be implemented for a variety of reasons. (Representative image)

Last year, the government came up with a new definition of poor when, while approving a quota for economically weaker upper castes in government jobs, it fixed a cut-off annual household income of Rs 8 lakh. Apart from the fact that this new income cut-off meant that 80% of Indians were poor or ‘economically weaker’—the term used by the government—it was the same cut-off as that used for ‘creamy layer’ OBCs in 2017. In which case, the government seemed to be making the point that anyone who was not ‘creamy layer’ was ‘economically weak’. If that wasn’t bad enough, on the eve of the Bihar elections where OBCs are an important vote bank, the government is, based on the National Commission for the Backward Classes (NCBC) approving it, likely to raise the ‘creamy layer’ cut-off—this determines which OBC household can qualify for reservation benefits—to Rs 12 lakh.

This is quite worrying and, ideally, should not be implemented for a variety of reasons. For one, the last cut-off of Rs 8 lakh was fixed in 2017, and incomes have risen by around 13% since then while the government is proposing a 33% increase in the cut-off. More important, while Rs 12 lakh may seem like a middle-class income—both husband and wife earning Rs 50,000 per month each—it is a lot of money in the Indian context where the per capita income stood at just Rs 1,34,226 in 2019-20, as per the ministry of statistics and programme implementation. According to data from Price, a cut-off of Rs 12 lakh per annum eliminates just 1.2% of all OBC households; or, 98.8% of OBCs will be able to avail of the quota; in the case of India’s total population, less than 2% of households have an income of over Rs 12 lakh. Since the concept of ‘creamy layer’—introduced in 1992 in the Indra Sawhney judgment—was to ensure the better off didn’t take away all the benefits, the cut-off needs to be a lot lower, to ensure that benefits are available to just the bottom 20-30% of the population.

Indeed, since reservations seem to have become self-perpetuating while the Constitution had envisaged just a 10-year period for them, the government needs to come up with a self-limiting formula that is not just painless, it also delivers what the reservations were meant to. The best way to do this is to use educational qualifications instead of income criterion. Data from Price confirms that household income levels go up dramatically based on education levels—by 60% when an OBC household has a graduate salary-earner versus when that individual has just passed the 10th standard. Ideally, then, the attempt of any reservations policy is to ensure that household education levels rise. A good cut-off, then, is college education. The moment a household has a graduate member, it should become ineligible for reservations in college; this will ensure that, over time, less-educated households get a better chance at getting educated. In the case of reservations for jobs, a cut-off can be a family getting a job through reservation not being entitled for another. Once again, this will ensure the benefit spreads to all members of society instead of being cornered by just the better off.