What began in New Delhi last month as a doctors' strike to protest an affirmative action proposal for disadvantaged Indians, spread over the weekend and is threatening to flare into a government versus industry battle.
As a strike by thousands of doctors and medical students intensified on Monday, services in dozens of hospitals across the country were disrupted.
In India's technology capital of Bangalore, 500 medical and engineering students marched in the streets over the weekend.
The protests are a reaction to a federal proposal that calls for nearly half of the jobs at government hospitals and half the seats at medical schools to be reserved for lower-caste and other disadvantaged Indians.
Several ministers have gone further and pushed for legislation to reserve spots at other types of schools as well as jobs in private companies for people belonging to disadvantaged groups.
Supporters of the proposal say that India's economy, which is growing by eight percent annually, has only accentuated the inequalities of Indian society. In a television interview over the weekend, India's industry minister, Kamal Nath, declared that the government was committed to affirmative action and that it wanted to ensure that growth was "inclusive."
But some industry executives said that increasing affirmative action in the private sector would rob the country of its competitive edge. In fact, unregulated labor markets and the country's education system are credited with the spectacular growth of India's outsourcing industry.
"There is rising concern that affirmative action in jobs will erode competitiveness and put off multinational firms," said Partha Iyengar, vice president for research at the Indian operations of Gartner Inc, a technology research and consulting company.
Iyengar said that companies were lobbying against a large-scale move to reserve jobs in the private sector.
"If affirmative action is enforced in the outsourcing industry, for instance, it will lead to resource turbulence," said Iyengar, who said challenges like language and culture would reduce the employable pool of candidates for companies.
Representatives of the Confederation of Indian Industry, India's largest industry group, said that foreign investors were watching the latest developments carefully.
Affirmative action is a thorny political issue in a country where much of the economy is farm-based and about one in three Indians live on less than a dollar a day.
About two-thirds of India's 1.1 billion people live in villages with poor access to schools and even less access to well-paying jobs. More than half of India's schools have only one teacher for every two classrooms.
At the same time, applicants fight fiercely for admission to India's most prestigious medical and technical schools.
Competition is more intense than in Ivy League schools in the US. And global companies like Citigroup, Lehman Brothers, Microsoft and General Electric routinely hire graduates of the Indian Institutes of Technology and Indian Institutes of Management.