CONTEXT The Haryana government has recently passed legislation that mandates companies in Haryana to provide jobs to local Haryanvis first, before hiring people from outside the State.
UNEMPLOYMENT STATUS OF HARYANA
- As per data from the Centre for Monitoring Indian Economy, or CMIE- the unemployment rate in Haryana is the highest of all States in India.
- A whopping 80% of women in Haryana who want to work cannot find a job.
- More than half of all graduates in Haryana are jobless.
- The jobs situation in Haryana is staggeringly dismal.
PROBABLE REASON BEHIND SUCH LAW
- Politically, 11 out of the 18 million voters of Haryana do not have a regular job.
- World history warns us that when such a vast majority of adults are jobless, it inevitably leads to social revolutions and political upheavals.
- Therefore, the democratically elected Haryana government panicked and chose to reserve the few available jobs for its own voters.
- Haryana is not alone in this quandary. The cabinet of the government of Jharkhand, Tamil Nadu have announced a similar proposal to reserve jobs for locals.
WHAT NEEDS TO BE DONE BY STATES?
States need to ‘Focus on creating more jobs, not on reserving the few available ones’.
- When a company decides to expand its Indian operations, then the State governments can compete to lure it to their State and help create new jobs.
- It should provide the company abundant high quality skilled and unskilled labour, land at affordable prices, uninterrupted supply of electricity, water and other such ‘ease of business’ facilities for its expansion.
- Further, any tax advantages that a particular State can provide vis-à-vis others will increase its attractiveness for the company.
- Beyond all these, states need to provide the most critical factor in the choice of a location for a large business is the ‘agglomeration effect’ — the ecosystem of supply chain, talent, good living conditions and so on.
- In reality, in India a poorer State can hardly compete against a richer State to attract the interested company in its state. While in countries like America, States compete against each other vigorously using tax concessions and land offers to bring new jobs to their States.
- The availability of skilled local labour is a function of many decades of social progress of the State and cannot be retooled immediately.
- After the introduction of the Goods and Services Tax (GST), State governments in India have lost their fiscal autonomy and have no powers to provide any tax concessions to businesses.
- A State with an already well-established network of suppliers, people, schools, etc. are at a greater advantage to attract even more businesses than the States that are left behind. This leads to a cycle of the more prosperous States growing even faster at the expense of the lagging States.
The ‘333’ danger:
- This phenomenon is evident in India’s increasing economic divergence among its States.
- The ‘3-3-3’ effect refers to — 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, compared to 1.4 times in 1970.
- This gap between the richer and poorer States in India is only widening rapidly and not narrowing, due to the agglomeration impact of modern economic development paradigms.
- In the absence of a level playing field and with no fiscal autonomy, it is enormously difficult for developing States in India to attract new investments and create new jobs.
- The potent combination of widening inter-State inequality, a ‘rich States get richer’ economic development model, an impending demographic disaster and shrinking fiscal autonomy for elected State governments in a politically and culturally diverse democracy propagates nativistic sub-nationalism among the various States of India.
Until the economic playing fields for the various States are levelled and much greater fiscal freedom provided to the States, “don’t protect but create jobs” will only remain a topic of a hollow lecture and moral sermons.