Classed as untouchable but essential to daily life

India Dispatch: India's Dalit, or untouchable, entrepreneurs are proving to be an economic powerhouse, and new legislation should boost their business.

Sungha Bhain makes masala paste in her workshop in the Dharavi district of Mumbai. Pia Heikkila for The National

At midday in Dharavi, Mumbai's largest slum, the mercury rises close to 40°C as Sungha Bhain takes a break from working a cumbersome masala-paste machine.

"I've had my own business over 10 years," the 60-year-old grandmother says amid a cloud of red chilli dust. "We sell the paste on the market for 100 rupees [Dh7.36] per kilo. This is India's most popular spice, so thankfully there is always a demand for it."

India Dispatch Inside the emerging giant

Keep pace with developing events in the BRICS economy Learn more

Ms Bhain is one of thousands of Dalit, or untouchable, entrepreneurs in Dharavi who are set to get a boost from affirmative action legislation.

The cabinet has passed a public procurement law that commits all government departments to make at least 4 per cent of total purchases from businesses run by people from Dalit and tribal communities.

The arrangement will provide a substantial windfall as the government's procurement department spends about US$7 billion (Dh25.71bn) annually on supplies such as stationery and office furniture.

It is estimated that Dalit-owned enterprises contribute 5 per cent to India's GDP, which, according to the World Bank, was $1.73 trillion last year. These figures alone make this informal sector one of the largest contributors to growth, says Sheetal Kumbhar, the senior executiveof the Dalit Indian Chamber of Commerce & Industry.

"This is massively important sector but also at the same time the one that is most neglected. There cannot be inclusive growth in this country without taking a note of this sector," Mr Kumbhar said.

Dalits are being noticed elsewhere, too. The US private-equity company Warburg Pincus is in talks with several Dalit-led enterprises, Mr Kumbhar says. There is also talk of the Indian government creating a Dalit venture capital fund. Small businesses in Dharavi alone turn over about $1bn annually, according to Reality Gives, a charity that works in Dharavi.

But few of Dharavi's small businesses have employed standard bookkeeping methods or accountants or have been officially registered. Most businesses operate in small areas, often with old-fashioned machinery. Pen, pad and calculator is the usual style of accounting.

Dalit businesses, however, are vital to keeping Mumbai running. Five-star hotels use them for their laundry, restaurants get their poppadoms from Dharavi, and richer folk have their repairs done by the sector - anything from curtains to fridges.

Getting credit to expand has been a traditional stumbling block for Dalit enterprises.

"The hardest part for Dalit enterprises are getting the loans. "Traditionally they have been left outside the formal banking system and therefore getting loans to grow their businesses has been near impossible," says Mr Kumbhar. Many Dalit families work in the Gulf. No accurate data is available on how many Indian families in the Gulf could be classified as Dalits since the sector is disorganised, but the number is "in hundreds of thousands if not in millions, since most are working in the informal sector jobs," according to the chamber of commerce.

People who work in the sector are ambitious and hard-working.

For Dalit families wanting to start businesses on their return from the Gulf, help is at hand from the chamber.

"These people lack formal education but it doesn't mean they are short on drive," says Mr Kumbhar. "On the contrary, if there is a way out of poverty, people are willing to go for it and establish their own … enterprises."