Context: Once one of the most sought-after investment destinations, particularly for skill driven manufacturing sectors such as automobiles, Haryana seems to have lost some of its sheen with its share of new investment projects in the country tripping to a six year low of 1.06% in 202223, down sharply from almost 3% in the year before.
Highlights
- Total investment outlays announced in the State fell 30% last year to ₹39,000odd crore from nearly ₹56,000 crore in 202122.
- This pushed Haryana from the ninth best State in terms of new investment projects to the 13th rank in 202223.
- Manufacturing investments declined 60% to just about ₹9,500 crore.
- Maruti Suzuki — one of the State’s largest legacy investors, which announced a ₹18,000crore project, Haryana’s largest investment in 202122 — is now eyeing a ₹24,000crore plant that will come up elsewhere.
- Compared to 202122, when manufacturing, industrial parks, roadways and realty projects dominated the State’s largest investments, realty projects dominate the outlays announced in 202223.
The decline in fresh projects in the State coincides with its enactment of a law in early 2022 that reserved 75% of private sector jobs with monthly salaries up to ₹30,000 for local people. The law has been kept in abeyance after being challenged judicially, but the suspense over its implementation remains a worry for investors.
HARYANA’S LOCAL RESERVATION LAW
Haryana government passed a law reserving 75% of private sector jobs for residents of the state. This raised a debate on such sons of soil policies undertaken by state governments like Haryana and Andhra Pradesh.
Haryana Employment of Local Candidates Act 2020
The Act requires private sector employers to reserve 75% of job posts that offer a salary of less than Rs 30,000 for individuals who are domiciled in Haryana. It is applicable to all private companies, societies, partnership firms, trusts, any person employing ten or more persons in Haryana, or any other entity as may be notified by the Government.
Potential Benefits
• Provides employment opportunities to the locals and reduces regional inequalities.
• Reduces the friction between local and Migrant labour and helps in managing labour unrest.
• Since migration of labour is more often seasonal, the law can lower the dependence on migrant labour and reduces absenteeism.
Problems
- Drive away investments: Mandatory quotas for jobs and powers for officials to slap penalties on companies for violations may drive away competitive firms who will be wary of new inspector raj and the impact on productivity.
- Barrier to migration: Poses risk of obstructing free flow of labour from labour surplus states to labour shortage states, which is essential to reap the benefits of Demographic dividend.
- Legal Implications: Violation of Art 14, Art 16 and Art 19(a) guaranteed by the Indian Constitution. In a landmark Pradeep Jain Case, the Supreme Court has raised concerns that such policies may lead to Economic and Social Fragmentation of India.
- Political Implications: Rise of strong Sons-of-soil movement even in other states and thus end up affecting the spirit of Cooperative Federalism.
- Increased Automation: Such affirmative actions in private industry might encourage firms to increase automation in production process which reduces employment generation potential of private firms.
- Social Implications: In a multilinguistic society such as India, restricted work-related migration stifles interaction of different languages and cultures and helps in thriving regionalist tendencies.
- Unsustainable solution: Though such reservations provide temporary benefits to the local community in terms of assured employment, it will not help in addressing the basic issues that are responsible for low employment growth.
Hence, States need to abstain from such inward- oriented and parochial policies, adopt spirit of cooperative federalism and work in a coordinated and synergistic manner to address the root cause- Lack of employment opportunities.
