Haryana’s local job reservation move is short-sighted and unhelpful

As Haryana looks inward, Tamil Nadu joins half a dozen other states, such as Maharashtra, Punjab, Andhra Pradesh and West Bengal, trying to woo Musk, by promising that the state will ensure that “Setting up an office will be a breeze”, while helping mitigate all the challenges. Political recognition of the worrying trend of declining jobs in the past few years by some states including Andhra Pradesh, Punjab and Karnataka resorting to affirmative action in the private sector Or can be seen as a reaction. Investment in the formal sector and manufacturing. The issue of quality jobs and income seems ripe to become an election issue. More states may likewise resort to populist, short-sighted policy responses that are also fraught with constitutional challenges.

These trends are the result of deep regional economic imbalances in the country, such as rising inequality and the gap between listed and unlisted firms in the past few years, and in the aftermath of the pandemic.

The reality is that over the past two decades, investments – both foreign and local – have flowed into a handful of powerhouse states, such as Maharashtra, Gujarat, Karnataka, Tamil Nadu and perhaps even Telangana. This is because these states have a good mix of manufacturing, services and farmland contributing to the state’s GDP apart from quality of skilled workforce, infrastructure, governance, other economic and social indicators. Along with this is their ability to remain largely competitive in terms of attractiveness to investors, despite changes in the political system through higher capital and social spending. These underlying forces clearly provide the cushion to emerge out of an economic storm and rebound rapidly.

This probably explains the growing economic divergence between states in India, mostly to the north and east of the Vindhyas. And affirmative actions such as the actions taken by Haryana are bound to be self-defeating. Mandatory quotas for jobs and rights for executives to impose penalties on companies for violations are certainly meant to ward off competing firms that will be wary of the new inspector raj and the impact on productivity. It is also a bad time as the International Monetary Fund in its final economic outlook flagged the risk of a reduction in employment growth output or economic growth in emerging markets, even in the next few years because of the Covid shock. To recover too. Importantly, it also runs the risk of negating the benefits of inter-state migration, as seen in the demand for clothing from workers from the north and east in many regions, especially in some states of the south and west.

Fifty years ago, the Finance Commission – acknowledging the structural imbalance between the states and the mediator of financial transfer between the Union and the states – introduced the concept of special category of states. But this has not helped promote economic convergence. Rather, it will help if Haryana and many other backward states invest more in education, health and skill development. This could lead to medium-term spin-offs increasing the quality of public goods they can provide. This should attract investors, generate employment and increase income. Not a legal order.