An Economic Theory on Why Indian Muslims Lag People of Other Religions

Going back to the 2006 Sachar Committee report and research that’s followed, it’s been widely documented that Muslims in India have lagged behind the population as a whole on a range of economic and social indicators, such as education and health. Specifically, data in the Planning Commission’s India Human Development Report 2011 suggest that Muslims lag all social groups except scheduled castes and scheduled tribes.

Economist Michael Walton of Harvard’s Kennedy School presents data showing that Muslims account for 89% of household expenditure per capita as a share of the national average, whereas Hindus account for 97%, Christians are above 100%, and other religions (principally Sikh and Jain) are at 132%. Again, only SCs and STs are worse off than Muslims, coming in at 78% and 67%, respectively. A share below 100% means that a particular group is spending less than the national average and a share over 100%
means it is spending more than the national average.

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Mr. Walton also shows Muslims in India fare poorly on poverty indicators, with incidence of 35.5% only ahead of SCs at 38.5% and STs at 46.5%. Poverty incidence among Hindus is 26.9%. All of these data are culled from the National Sample Survey 2004-05, the last year for which data has been analyzed and are consistent with the findings of the Sachar report.

A team headed by Abusaleh Shariff, lead economist on the Sachar report, has produced new research, reported on here, that reconfirms the impression Muslims lag on economic and social indicators, in particular the share of their contribution to high value-added sectors of the economy.

Mr. Shariff and his team suggest that the lower performance and productivity levels of Muslims provide a prima facie case that they’re disadvantaged, adding  that this provides a case for “pro-poor and just policies” to help bridge the gap. While the raw data are not in dispute, Mr. Shariff’s interpretation is incomplete because, beyond referencing a state of deprivation, it doesn’t probe into the reasons why Muslims may be faring poorly.

Could it be that the poor performance on economic and social indicators by India’s Muslims today doesn’t just reflect current disadvantage and deprivation, but also has
far deeper historical, cultural, and religious roots? Timur Kuran, an economics professor at Duke University, together with Anantdeep Singh, a researcher at the University of Southern California, in a new study have argued that the roots of Muslims’ lagging performance may be attributed to institutional differences that go back to the British colonial period. In doing so, they discount conventional explanations including the supposed “conservatism and insularity” of Islam, the supposed “demoralization” of the Muslim community after the fall of the Mughal empire, and the supposed animosity of the attitude of British colonizers against the Muslims and in favor of the Hindus.

Instead, Mr. Kuran and Mr. Singh argue that the real culprit is the Islamic inheritance system, which the British codified and enforced after coming to power in India. They suggest that the typical Muslim form of saving across generations, family trusts known as Waqfs, were not well suited for the pooling of capital across families, nor were they well suited to pursuing profit-making enterprises. What they were good at, though, was providing a safe way for an individual family to save its wealth over time.

By contrast, more flexible Hindu inheritance practices were much better suited to capital accumulation within a given family, the pooling of resources within extended family and clan networks, and the preservation and growth of wealth across generations. What is more, Hindus tended to do business within family run enterprises that were able to transition to modern corporate setups in the 20th century, whereas Muslims tended to rely on transitory and short-lived business partnerships with other Muslims that were difficult to translate into the structure of a modern corporation.

While it’s obviously true that Islamic inheritance practices predate British rule, the study documents that these laws were only loosely enforced during the late Mughal period and many Muslims, especially converts, continued to live by non-Islamic customs including inheritance practices. However, the British, who set up common law courts, more rigorously applied the distinct inheritance laws of different communities. Crucially, as Mr. Kuran and Mr. Singh argue, the British, being unfamiliar with Indian traditions, institutionalized a more “classical” or Arabic form of Islamic law than the more flexible practices derived from Persian and other sources that had existed under the Mughals.

The end result was that in practice many more Muslims became subject to a stricter enforcement of Islamic laws. Tellingly, the Muslims who’ve fared best economically come from small  ”nonconforming” communities that converted from Hinduism – the Khojas, Bohras, Memons and Girasias – who as it happens were allowed by the British to retain their original inheritance practices. Azim Premji, India’s richest Muslim and the only Indian Muslim on the Forbes list of billionaires, is a Khoja.

To borrow a term from historian Niall Ferguson’s book “Civilization: The West and the Rest,” were the majority of Indian Muslims deprived of a “killer app” that Hindus and nonconforming Muslims had access to, preventing their development of modern enterprises? Mr. Kuran and Mr. Singh make a compelling case that the answer is yes and
that this helps explain their current state of relative deprivation.

In their book, “Why Nations Fail,” MIT economist Daron Acemoglu and Harvard political scientist Jim Robinson persuasively argue that institutional structures going back centuries to colonial times help explain the different performances of countries today. The same logic that they apply to nations may also apply to communities within a
given nation. Where we came from might well affect where we are today, and history casts a longer shadow than we might think.

News source: WSJ

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  • B K Chowla

    I hope our Muslim brothers realise that successive Govts have used them as vote banks.Hopefully,they will not fall in the trap again.
    What they need is education.They need a selfless towering personality as a leader