Perspectives from ISB

On  November 5, 2020, Haryana Assembly passed the ’Haryana State Employment of Local Candidates Bill’ that seeks to reserve 75 per cent of jobs in the private sector for its residents. With its adoption, Haryana has become the latest entrant to a new cult of ‘local member’s club’ that already count Andhra Pradesh and Madhya Pradesh and to some extent Karnataka and Maharashtra.

This is a dangerous trend wherein state governments are trying to appease the citizenry through this carrot, in order to be less accountable for their inefficiencies and failure in creating avenues for growth and livelihood. These measures would amount to obstructing the natural flow of resources for optimum utilisation and maximum returns, within the economy.

It can be safely assumed that that the genesis of these bills lies in the normative assumption that residents are unable to enjoy the fruits of growth because the ‘outsiders’ take away the precious resources of the state. However, somewhere in between, it has been conveniently forgotten that it is the same outsider-residents that have contributed to the economic growth of the state.

Amongst all this, the key question of internal migration needs to be addressed. Many people believe it to be the real strength behind India’s growth. The Economic Survey 2016-17, (chapter India on the Move and Churning: New Evidence), tried to estimate the magnitude of internal migration and observed that the extent of migration is much more than previously thought and presented district-wise heat maps for further analysis. One of the most interesting findings was that the perceived barrier of language does not play any significant role in this grand scheme of things. The other critical observation being that the pace of migration is accelerating despite the increase in domicile-based policies and lack of portability of social welfare benefits. Unfortunately, we have witnessed these shortcomings during the Covid-19 pandemic. The recent push by Union Government on reforms, such as the ‘One Nation One Ration Card’ scheme and the portability guidelines for Ayushman Bharat, appear to be in the right direction and would hopefully work towards soothing the vagaries of the internal migration. Though the local job reservation laws seem to work counter to these thoughts.

Economics 101 tells us that forces of demand and supply work towards bringing an equilibrium, and in this case, of the labour force. If the local populace is unable to meet the requirements, there would be a natural flow from other parts of the country. The state governments, on the other hand, should analyse the reasons behind it – is it because of a skill-gap, some community behaviour, etc. If there is discrimination by the industry towards the local population, it should be dealt through by law. However, in absence of any such reason(s), existing issues should be tackled better, rather than push down such legislation. Over and above these facts, if the state governments wish to restrict entry from other states, they should keep in mind the resources being drawn from the Union, statistically and morally.

This brings us to the most important point – the cost of compliance. The Haryana Act, for example, mandates that the companies have to maintain a certain ratio for a particular kind of job. These complications increase regulatory compliance burden along with a heightened risk of litigation, which adds to the cost of operations. Companies will have to expend resources in maintaining these additional registers for unproductive activities when such resources could easily be put to better use. The other disturbing part is the liability clause, as the burden of proving the domicile lies with the company. The Haryana Act states that the liability rests with the management, including the MD of the company, and in case of Limited Liability Partnerships, all the partners would be liable for punishment in case there are lacunae in implementation. These provisions could potentially lead to rent-seeking by state officials through a modified form of erstwhile ‘license-quota’ raj.

The easiest way to find a solution is to understand the problem, especially when there are plenty of resources available to guide. Most government programmes these days are accompanied by real time databases, that not only help in governance of the implementation mechanisms but can also be used to estimate the skill gaps, workflow demands, etc. An interesting analysis done by DIRI at ISB brings to fore the intersection of the manufacturing jobsites in India and the movement of workers to these sites.  It points to the lack of skill centres around the Golden Quadrilateral and Dedicated High Freight Corridor projects. Governments across states can concentrate and collaborate their efforts in establishing skill centres at strategic points with future demands clearly in sight.

The pressure on the state governments seems to be because of the increasing number of people unable to find work and more so, closer to their residence. If this is the case, what could be the probable solutions? Skilling could be one. The knowledge gaps in the education system lead to unemployment even after 10+2+3/4 years of education. Vocational training centres such as improved versions of Industrial Training Institutes (ITIs) and Polytechnic Institutes, could be an answer. Governments should invite or liaison with industries to run these institutes, so the youth are exposed to new, relevant technologies & techniques and are industry ready. The government-aid could be in the form of redeemable cash vouchers which the participants could use at an institute of their choice. These vouchers could be routed through the existing DBT mechanism, thereby reducing the chances of illegal or unwarranted use. Though there were initial attempts to get industries to adopt ITIs in 2015, they did not bear desired results. In today’s time of sandbox approach, limited pilots on revamped lines could layout the suitability of any specific approach and might also bring out the lacunae in understanding of the behavioural and the educational aspect.

Regrettably, short-term populist measures such as local job reservation create unnatural and complicated barriers for the society and economy, creating forced fault lines. The rights of the marginalised section of society must be protected but generalising these problems and bringing out such legislations at the cost of the economic growth and fragmenting the democratic fibre of the nation is not a solution. As Babasaheb Ambedkar had said, “An ideal society should be mobile, should be full of channels for conveying a change taking place in one part to other parts.” Thus, policymakers should focus on increasing the overall size of the ‘growth’ pie, which would be tantamount to increasing the pie for everyone.

Ankit Anand is Deputy General Manager – Strategic Initiatives & Regulatory Policy at Reliance Jio Infocomm Ltd. With more than nine years of experience in various roles in the Telecom Ecosystem, he is presently working at an intersection of technology and policy. He has a keen interest in politics and policy, domestically and globally. Ankit is presently a student of the AMPPP Co’21.

Picture: The Blue Diamond Gallery

DISCLAIMER : Any comments, speeches, articles, blogs, podcasts, videos/vlogs, opposite the editorial page/opinions andeditorials page (OP-ED), interview response etc. made by individuals should be accompanied by a clear disclaimer from the ones given below.

“The views expressed in this article are personal. Ankit Anand is a student of the Advanced Management Programme in Public Policy at the Indian School of Business.”

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