Racing to the bottom

Job stagnation is manifesting itself in the growing demands from influential castes to compete for jobs reserved for historically marginalised groups

Employment, or the lack of it, has been a front-page issue long before Budget FY25 revealed the government’s grudging and belated recognition of the problem. Economists (openly) and private sector chiefs (privately) agree that the three employment-linked incentive schemes and an internship programme outlined in the Budget are unlikely to be game-changers. As the Big Idea in this year’s budget exercise, however, it reflects the pressure that is increasingly being imposed on the private sector to do the heavy lifting on the employment front. Meanwhile, joblessness and the inadequate creation of good quality jobs are accelerating a race to the bottom with communities once considered quite prosperous clamouring for the backward class label to squeeze themselves into the reckoning for public sector jobs.

These twin trends have been gaining momentum since the disastrous demonetisation of 2016. Ironically, they are likely to weaken the dynamics of job creation even further.

Let’s consider the private sector. Murmurs of extending caste-based affirmative action on the same lines as the public sector have been heard in the public domain since the early years of the 21st century. Rahul Gandhi vaguely mentioned it recently. Because it’s such a bad idea, no one took it (or him) seriously until the Andhra Pradesh Assembly sent a wake-up call in 2019 by passing a law reserving three-fourths of jobs in the private sector for local candidates earning up to Rs 30,000 a month. That law has been in limbo after the Andhra Pradesh High Court suggested it “may be unconstitutional”.

This legal opinion did not deter Haryana. Reeling from an electoral debacle following an agitation by the Jat community for recognition as an Other Backward Class (OBC) — more on this later — the state passed a similar law in 2020, which even received the Governor’s assent. In a state in which its principal city, Gurugram, is built on migrant labour, the signals were clear. But the legal challenge to this by the Faridabad Industries Association met with a decisive ruling from the Punjab and Haryana High Court in November 2023 that unequivocally stated that the law violated the federal structure framed by the Constitution.

But politicians rarely let such inconvenient truths as a court ruling get in the way of populism. In December 2023, the Jharkhand Assembly passed a domicile Bill that mandated 100 per cent reservation of  Class III and IV-level jobs (for peons, drivers and so on) for locals, defined as those with land records from 1932 or before. This Bill didn’t make it past the Governor’s desk.

Undeterred by failures in other states — and the fact that the Supreme Court is now examining the issue — the Karnataka Cabinet decided in July this year to approve a law that went further than all the others. It sought to reserve 50 per cent of jobs in management positions and 70 per cent in non-managerial positions for locals. This time, an uproar from the Bengaluru-based IT and ITeS industries forced a retreat.

Beyond constitutional propriety, these attempts to co-opt the private sector in job creation are so self-defeating as to defy logic. Both Haryana and Karnataka have been hubs of dynamic global-facing businesses. Andhra has been trying to become one. Jharkhand hopes global natural resource companies will set base. All these states have joined the latest fashion for “investor business summits” to convince big businesses to direct their investments their way. Putting constraints on the talent they can hire is unlikely to encourage them.

Yet, it’s easy to see why job-populism is gaining traction among politicians. With the domestic private sector showing a marked reluctance to invest despite multiple exhortations from the prime minister this past decade and a capricious policy environment keeping foreign investors away, the market for quality jobs (i.e. those with benefits) has been stagnating. That leaves states with large discontented and increasingly youthful electorates to cope with.

Job stagnation is also manifesting itself in the myriad demands from vocal and powerful castes — Patels, Jats, Marathas, among others — to compete for jobs reserved for historically marginalised castes and classes. These communities flourished under the Raj and in the post-independence Licence Raj era but failed to take advantage of the early opportunities of economic liberalisation and now they find themselves increasingly falling behind as sub-par economic growth shrinks business potential. Such contestations may well exacerbate following the Supreme Court’s recent decision permitting sub-classifications among Scheduled Castes for affirmative action. The ruling, though correct in principle, is likely to create demands from a range of Scheduled Caste communities for backward status.

The obvious answer to this feverish and dispiriting race to the bottom — whether among castes or “sons of the soil” advocates — is to make India a desirable place for businesses to invest and expand. Current evidence suggests that this obvious fact, which is so much harder to achieve, eludes governments at the Centre and states still.