Why States are Planning for Reservation to Locals in Private Jobs?

Synopsis: Haryana already passed the proposal providing reservation to locals. Many other states are planning for the same. It is because the States in India are unable to create jobs for their local economy due to various issues.

Background

• Recently, the Haryana government has passed legislation for reservation of jobs to local Haryanvi’s first.
• On similar lines, the cabinet of the government of Jharkhand approved legislation to reserve jobs for Jharkhand residents.
• Also, The DMK in Tamil Nadu announced a proposal to reserve jobs for Tamils in its manifesto.
• Many economists have criticised the above policies of the State as it is against the liberal idea of a free economy.

What are the reasons for providing reservation in jobs for locals?

• First, increasing unemployment rate: As per the data from the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in Haryana is very high among all States in India.
• Second, fear of Demographic disaster: More than half of all graduates in Haryana are jobless. Increasing Unemployment of youths will inevitably lead to social revolutions and political disorder.
• Third, Interstate economic inequality is rising: For example, the ‘3-3-3’ effect. The three richest large States (Maharashtra, Tamil Nadu and Karnataka) are three times richer than the three poorest large States (Bihar, Uttar Pradesh and Madhya Pradesh), in per-capita income.
• Also, inequality is only widening due to the agglomeration impact of modern economic development.
• Fourth, States have less autonomy to attract new jobs and investment. The lack of autonomy within states pushes them to resort to measures such as protecting jobs for locals through reservation etc.,

Why the states’ ability to attract new industries is limited in India?

Attracting investments and industries is related to many critical factors. States have limited discretion to provide land at affordable prices, provisioning uninterrupted supply of electricity, water etc., But it does not have control over the following aspects that stimulate jobs in states.

1. First, Industries are willing to invest only in Economies which is growing steadily and at a faster pace. But the growth of Indian economy cannot be controlled by single states alone.
2. Second, the requirement of abundant high quality skilled and unskilled labour. However, the availability of skilled local labour is a result of many decades of social progress of the State. States that have a very high unemployment rate cannot skill their population within a short period of time.
3. Third, States have lost their fiscal autonomy after the introduction of the Goods and Services Tax (GST). They have no powers to provide any tax concessions to businesses. Whereas in America, States compete against each other vigorously using tax concessions.
4. Fourth, the agglomeration effect drives new investments and industries in states that already are well established   For example, supply chain, talent, good living conditions etc., This leads to a cycle of the more prosperous States growing much faster at the expense of the lagging States.

The increasing interstate disparity among states will only encourage nativistic sub-nationalism ideas and policies in the future, which is a threat to national integration. Hence, the centre should work towards bridging the development gap between different states along with greater fiscal freedom.

Source: The Hindu