There have been recurrent agendas in the political discourse arguing for reservations for locals in jobs. The idea has enjoyed a popular resurgence particularly in regional electoral politics. More often the logic is grounded in populism and is meant to burnish the credentials of politicians with the voters. Such quotas make for both poor economics and poor politics. Regional political leaders will normally do what is politically expedient, securing a larger share of a small number of new jobs for their own residents. After all, these individuals are part of their voting pool, not out-of-state workers who are registered as voters in their home states.  

Haryana is the latest aspirant to onboard this bandwagon. The local job quota law passed by the Haryana government may do more harm than good, especially in Gurugram, which is one of the biggest startup hubs in the country. It is the epicentre for myriad industries including outsourcing, IT services, consumer goods, automobiles and electronics. With Manesar, it is home to the offices of Pepsi, Coca-Cola, Nestle, Google, Reckitt Benckiser Hindustan Unilever, American Express, Samsung and others, as well as the factories of Maruti Suzuki and Hero MotoCorp. 

The New Haryana State Employment of Local Candidates Act, 2020 proposes to reserve at least 75 percent of jobs in the private sector for locals, with a monthly remuneration of up to Rs 50,000. The quota will be applicable for a period of 10 years after it is notified by the government.  A person who is domiciled in the state of Haryana will be eligible to get the benefit of job reservation under the law. The law stipulates that companies can hire from outside the state if suitable local candidates cannot be found but the government has to be informed.

The person needs to register on a designated portal for being eligible for a job under the law. The employer will be required to hire people through this portal. Every private employer in Haryana who has more than 10 people on salary or wages will have to first register on a portal within the next three months. Any private company that does not follow the provisions of the law can be fined a minimum of Rs 10,000 to a maximum of Rs 2 lakh.

Gurugram is the world’s BPM capital, employing about 5 percent of the global BPM workforce and 13 per cent of the total Indian BPM workforce. The IT and IT-enabled services sector contributes about 10 per cent to Haryana’s GDP and makes up for more than 50 per cent of the state’s exports. Haryana is India’s largest auto hub and produces 50 per cent of the country's passenger vehicles, 60 percent of motorcycles and 11 percent of the country’s tractors. Of the total 250 original equipment manufacturers, 50 are present in Haryana and the state has a strong base of 120,000 small and medium enterprises, which provide a network of auto ancillary companies. The automotive industry accounts for more than 25 percent of Haryana's GDP, employs over 1 million, and has investments to the tune of Rs 40,000 crore.

Haryana is facing immense competition from other states that have now started attracting industrial investment. Those states are offering liberal policies and employment-incentive schemes. The new local job law could severely reduce new investments in Haryana. Investors and entrepreneurs need to source the best resources to be competitive and successful. If companies are forced in such a regressive straightjacket and compelled  to hire local candidates alone, irrespective of their skills, talent, or suitability for the job, they are likely to look beyond the state and avoid operating (or significantly reduce their business activities) in such locations . This move goes against the basic principle of meritocracy that acts as the foundation for businesses to grow and remain competitive.

Haryana is not the first State to introduce such a law. In 2008, Maharashtra had introduced 80 percent reservation for locals in the industries that seek state incentives, though this was not implemented. Similarly Gujarat also introduced 85% reservation for locals in 1995 and yet the policy was neither implemented in private or public sector. Andhra Pradesh has reserved 75 per cent jobs for local residents; Karnataka has already contemplated the idea of reserving all blue-collar jobs for the locals; and Madhya Pradesh has announced that public employment in entirety within the state be reserved for state residents.

Such laws violate Article 19(1)(d), (e), and (g) of the Constitution which promises all citizens the fundamental right to move freely throughout India, reside or settle in any part of India, and to practice any profession, occupation, trade or business.  Article 16(2) clearly prohibits discrimination based on place of birth. The only enabling provision to make special avenues or opportunities in public employment for any class of citizens is provided under Article 16(3), which empowers the Parliament alone to undertake such an exercise and not the State legislatures.

The Supreme Court of India has largely been against local reservations. In the case of Pradeep Jain, Union of India, the Court had found the policies of reserving jobs for sons of the soil as violative of the Constitution. However, the Court did not provide an express rule against it because the issues of the case were based on a different question on the right to equality. Prima facie, the Supreme Court observed that this would seem to be constitutionally impermissible though it chose not to express any definite opinion. 

In 1995, the Supreme Court, in the case of Sunanda Reddy v state of Andhra Pradesh, upheld the decision in Pradeep Jain and struck down the policy that allowed an extra 5% weightage in marks for candidates with Telugu as a medium of their instruction. In this judgment, the Supreme Court quoted from the Pradeep Jain Judgement that said:

“Now if India is one nation and there is only one citizenship, namely, citizenship of India, and every citizen has a right to move freely throughout the territory of India and to reside and settle in any part of India…. it is difficult to see how a citizen having his permanent home in Tamil Nadu or speaking Tamil language can be regarded as an outsider in Uttar Pradesh….To regard him as an outsider would be to deny him his constitutional rights and to derecognise the essential unity and integrity of the country by treating it as if it were a mere conglomeration of independent States”. 

Modern management also espouses diversity in the workforce in order to promote a healthy industrial climate. Experience of the past suggests that preference to locals by companies has led to intractable industrial problems. Local monopolies in staff profiles have given rise to trade unions which have been patronized by local politicians and which have severely affected productivity and jeopardized the working of these organizations. In fact, complex labour regulations have already retarded formal job creation and discouraged the promotion of labour-intensive production techniques.

This approach is aimed more at garnering political support of the local youth and has little to do with the long term economic development of the state. While it may fetch immediate political gains it can have serious long term economic consequences. Modern business has become extremely competitive, and in the absence of monopolistic controls, the most efficient and competitive businesses alone can survive and prosper. We are seeing how the public sector is slowly collapsing on account of misguided political agendas. There is a need to see beyond purely myopic horizons and focus on long term implications for the economy.

India’s industrial growth has been driven by its comparative advantage in areas such as information technology and high-end manufacturing that do not create enough new jobs, given India’s youthful demographic profile and its fast-growing workforce. The industrial laws are a major reason for this phenomena .The government must encourage free flow of manpower T could improve social harmony and curb local chauvinism. The cross cultural exchange can also lead to cross pollination of ideas   and improve not just social harmony but enrich learning and innovation. It could also promote a healthier work ethic, something India woefully lacks. 

An industry requires a skilled workforce to produce high quality products that are globally competitive. Hiring has to be done on the basis of merit and talent rather than the domicile of the candidates. The reason for the industry to employ candidates from outside the State is due to the shortage of adequately skilled and locally available manpower. Mandating private industry to provide jobs based on a domicile criterion will severely affect efficiency of these organisations as it will be forced to compromise on job specific skill set, experience and competitiveness. 

The best way to provide jobs to the youth of a state or region  state is by equipping them with appropriate skills and giving  them proper training. The importance of imparting skill training to the youth is well-recognised and has been flagged as a national priority for almost a decade, with significant initiatives being launched by the Government. The feedback from corporate India and research institutes shows a grim reality that about 65-75 percent of the 15 million Indian youth who enter the workforce each year are not job-ready or suitably employable.

In a recent article Daniel Bell, the well-known authority on the China model of development made a very pertinent observation that is highly relevant to India. He said that “a relentless pursuit of meritocracy through high quality education and placing talented persons in crucial spots in the country’s governance has hugely enhanced the state’s leadership capacity.” This focus on meritocracy assisted China in eliminating poverty, achieving larger efficiencies and turning China into a middle-class nation. Despite conceding that a democracy is constrained to wrestle with the challenge of combining efficiency with fairness, Bell concludes that had India “diverted some of its political energy away from reservations and focused more on placing the most talented officials in the vital sectors of education and governance, the ordinary citizen would have been much better off”.