It is tough to tell whether the job reservation bill is only a political gambit or the State leadership has lost its marbles. Either way, it’s a bad move.

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The job reservation bill passed by Haryana seems clearly aimed at currying favour with the local populace. However, there are significant legal lacunae that suggest a challenge in the courts may not pass the test—as noted lawyer Dushyant Dave told CNBC-TV18 on Friday. If that’s the case, and if we presume the State Government leadership is aware of this, the question is: Why pass the bill?

The only logical explanation is politics. The move props up the State leaders as champions of the local youth, who are demanding jobs (that’s an important political constituency) while painting industry as anti-locals. While any such move could have short-term political benefits, creating fissures between people and industry can have a deep and lasting impact on the fabric of the State. Here, the message ‘don’t just eye the throne, also look at the kingdom you will rule’, seems appropriate. This because any move to enforce such a law will cause capital and business to flee, leaving the State a pale shadow of its former self.

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Even if the law is challenged legally and a verdict awaited, politicians, in the meantime, will maintain the rhetoric to keep the issue centre-stage. That hurts business.

It’s enforcement that counts

While the industry awaits clarity on the finer points and applicability of the bill, the more important issue is how it will be enforced, assuming the bill isn’t challenged in court. The larger, more resourceful businesses will likely find a workaround, but the small and medium businesses will bear the brunt. And this may well lead to the return of turn-a-blind-eye payments to officials to keep the peace.

The return of babu raj

Recently the Prime Minister in an address waxed eloquent on why the running of the country should not be left to bureaucrats alone. He wants minimum government, maximum governance. He has also been batting for induction of talent laterally into government and government-owned bodies, stressing on faceless assessments for tax and, just last week, said that self-regulation, self-attesting and self-certification is the way forward. This, a day after news reports of Niti Aayog said it has started a drive to remove obstacles to ease of doing business at the level of courts and State governments. Haryana’s job reservation bill cocks a snook at all of this.

The bill provides for invasion of all places of business by designated officials to check files, records et all, at will and at a time of their choosing. In other words, officers have been issued a carte blanche if they use the job reservation calling card. That’s like going back to the 20th century of red-tapism and corruption. Imagine this. If an employer wishes to hire a non-local for a less than Rs 50,000 job because such skillset is not available locally, the employer will need to seek the permission of the local officer, and his proposal could well be rejected. This could virtually amount to State officers stepping into the shoes of the HR in companies, as their word would prevail.

What’s more, given the penalties of Rs 1-2 lakh for the first offence and up to Rs 5 lakh for subsequent offences, the law could end up laying the base for greater corruption.

Seeds of mega disruption

Haryana accounts for over 3 percent of India’s GDP, and its GSDP has grown from Rs 4.9 trillion in fiscal 2016 to Rs 9.4 trillion in fiscal 2020, a CAGR of 13.6 percent. Gurugram, Haryana’s biggest business district, is not just a large auto and industrial centre, but also the 2nd largest IT and 3rd largest financial hub in the country. It is also the medical tourism capital of India. It is the magnet that has drawn large investments over the past two decades leading to neighbouring towns, Manesar and Sohna, also benefitting from its rapid growth.

To give you a sense, Haryana has attracted $91 billion in cumulative foreign direct investment (FDI) since 2001 accounting for about 8-9 percent of the total FDI into the country. It also accounts for 2/3rd of passenger vehicle output, 60 percent of motorcycles and half the tractor production in the country, with a large slice of India’s auto/auto component and industrial exports too. And much of this economic activity is concentrated around Gurugram, which is adjacent to the nation’s capital Delhi.

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The city claims to host nearly half the Fortune 500 companies, with many like Coca Cola, Pepsi, Nestle, BMW and Hyundai having their corporate offices here. In fact, Gurugram is a cosmopolitan city and more culturally diverse than many others with nearly half its population being migrants. The city has attracted talent from across India and even from overseas, and the rapid urbanization of this region (a village till the early British colonial era) has driven up the economic indicators.

Unfortunately, much of the jobs have been taken up by more skilled and qualified migrants. And part of the local angst stems from this. What’s a problem, however, like an office bearer of the Gurgaon Industrial Association told CNBC-TV18 on Friday, is that the local youth are neither occupationally nor socially equipped to serve in modern industry. So, reservation of jobs can hardly be the solution.

Source: Census of India 2011, Part XIIA

Re-skilling is the answer

That unemployment is a big issue in Haryana is borne out by data. The State has the highest unemployment rate in the country at 26.4 percent, according to CMIE, followed closely by neighbour Rajasthan at 25.6 percent.

The problem definitely needs to be tackled on a war footing. What transpired in Gurugram and neighbouring areas about 10 years ago is not very different from what occurred in Devanahalli, near the Bangalore airport, more recently. A sudden coming into wealth as a result of land-to-riches phenomena, as locals sold the ancestral farm and non-farm land for development at hitherto unimagined sums, leading to a surge in well-being and consumption. In Bangalore, youth strutting around in the top brands with swanky cars soon invited the moniker ‘Devanahalli Boys’. These were the new rich, the new bad boys of the town, nary concerned about their education or their future careers, blinded by the present riches. A similar trend played out in Haryana many years ago with swanky weddings, chopper charters, luxe wheels all making it to the local headlines, as being associated with the new local rich.

Unfortunately, I have no data to back this argument, though there is enough anecdotal evidence. But whatever the cause, the reality today is that much of the local youth in Haryana today are not cut out for the kind of jobs on offer. And the only answer to that can be skilling and re-skilling of the aspirants. Industry experts suggest a public-private-partnership (PPP) model to address this need. This will be a long road, requiring greater effort and commitment from both the industry and the State, but one likely to yield positive tangible results. What it does not offer, though, is a palatable option if vote bank politics is the objective.

The risk of being called out

The events in Haryana seems to have put the Central Government in a pickle. The Prime Minister has come out strongly in favour of industry, privatization, and lesser government intervention, but the Haryana chapter of the party is walking a completely contrarian path. At a time when the focus is on improving ease of doing business, Haryana is all set to see its rank plunge from the current 16 out of 36. Given the wide ramifications of the job reservation bill, and the message it sends out to investors domestic and foreign—be mindful of the risk of Rajasthan following suit—it would be prudent if the highest offices in the ruling party step in to nip this new, ugly legislation in the bud.

First Published:Mar 6, 2021 2:53 PM IST