The Karnataka government has given its nod to a Bill that is highly problematic, one that does not measure up to the constitutional letter and spirit. The proposed law requires industries, factories and other establishments to appoint 50 per cent of local candidates in management categories and 75 per cent in non-management categories. The Karnataka State Employment of Local Candidates in the Industries, Factories and Other Establishments Bill, 2024, passed by the Cabinet on Monday, mandates that if qualified or suitable local candidates are not available, it will fall to the firms to take steps to train and engage local candidates within three years. To be sure, Karnataka is not the first state government in the country to go down this path. In the past, states like Andhra Pradesh (in 2019) and Haryana (in 2020) have brought similar laws. But such laws, wherever they are framed, discriminate among Indians. This is one of the main reasons why the Punjab and Haryana High Court struck down a similar law in November last year. The court said: “The concept of constitutional morality has been openly violated by introducing a secondary status to a set of citizens not belonging to the state of Haryana and curtailing their fundamental rights to earn their livelihood.”
Of course, the political push for such laws is set in a fraught context: There is widespread unemployment related distress in the country. Since state governments are elected by locals, it seems reasonable for chief ministers to attempt to secure the interests of their voters. However, there are several reasons why such policy moves are misconceived. The first issue, as the Punjab and Haryana pointed out, is of discrimination – the proposed law seeks to curb some citizens’ constitutionally protected freedom to move freely throughout the territory India and earn a livelihood. The second problem would be reintroduction of the dreaded inspector-raj, where a set of bureaucrats will be empowered to decide whether a firm should attract a penalty or be allowed to employ people from outside the state. Rent-seeking is a given in such a framework.
The third, and often ignored aspect of such a law is the impact it will have on the private sector. By now it is clear that there is no way governments in India — both at the Centre and state — can create enough jobs for India’s youth. The solution lies in making it easy for the private sector to grow and create new jobs. Such a law will militate against such job creation. It will raise compliance costs for private firms while undermining their ability to attract the best talent and reducing their overall efficiency and profitability. Such restrictive quotas could take a high toll on the dynamism of places like Gurugram and Bengaluru, which essentially thrive because of the openness of their economy.
