Haryana's myopic law

The impact of jobs for locals will not be limited to the state

The Haryana government has notified a law mandating private companies to reserve jobs for local candidates. The Haryana State Employment of Local Candidates Act, 2020, requires all companies, societies, trusts, partnership firms, and limited liability partnership firms to provide 75 per cent jobs with a monthly salary of up to Rs 50,000 to local candidates. The potential impact of the law can be gauged by industry’s reaction, which usually avoids criticising governments. One of the industry chambers rightly noted it would “spell disaster” for the state’s industrial development. In fact, the impact will not be limited to the state alone.

The law is problematic at multiple levels. For instance, as noted by legal experts, it is unconstitutional. The Indian Constitution does not allow discrimination based on the place of birth. It also gives all citizens the right to move freely and practise any profession. Thus, the law is unlikely to pass the constitutional validity test. However, what is worrying is that Haryana is not the first state to pass such a law. The Andhra Pradesh government got a similar law passed in 2019, which has been challenged and the matter is sub-judice. Besides, the Gujarat chief minister had said in 2018 that 80 per cent of jobs in manufacturing and services should be for locals. Several other states have also talked about bringing in similar laws. In a way, this shows how states look at the jobs issue. Instead of increasing the size of the pie, the idea is to redistribute it in a way that serves the immediate electoral need. Differently put, even the intent to implement such a law reflects the inability of the state to create enough jobs.

It also challenges the Union government’s stated position of improving the ease of doing business. To its credit, the Central government has taken several steps in recent times — such as simplifying labour laws and decriminalising the company law — to improve the ease of doing business. But laws in states restricting the pool of labour will significantly worsen the business environment. It would not only make businesses uncompetitive by potentially increasing the labour cost, but will also be a step back to the inspector raj. In any case, India has not been able to take advantage of its large pool of cheap labour. Laws like this will permanently destroy the potential. In this context, it is worth asking why investors would want to commit long-term funds in India, where laws are implemented without considering the ramifications.

At a broader level, along with affecting the overall economic potential, such laws will also increase regional imbalance by shutting down growth centres, which may have developed because of a variety of reasons, for surplus labour from states that have been left behind. It is also disappointing that a state government led by the Bharatiya Janata Party (BJP) has enacted such a law. Unlike a regional party, the BJP is expected to be able to see the bigger picture. Several other states that intend to implement such a myopic law are also led by the BJP. While the constitutionality of the law would be decided in court, the BJP’s central leadership and Prime Minister Narendra Modi should have stopped the Haryana government. The biggest challenge for the Modi government at the moment is to put India on a long-term sustainable growth path. The Manohar Lal Khattar government in Haryana has made a big dent in any such prospect.