Will spur similar demands in other states, a bad idea.
Andhra Pradesh chief minister Jagan Reddy has dealt a big blow to the idea of a pan-Indian market for all goods and services—and for people migrating from one state to another in search of jobs—by passing a legislation that says 75% of all jobs, including in the private sector, have to be reserved for local youth; factories have three years to comply and, if adequately skilled people are not available, firms will have to train local people with the required skills. Some other states have similar stipulations, but that is for industries that are set up after availing of financial incentives from the state government.
While it is early days yet, what is worrying is that some other states are also looking at laws similar to what Andhra Pradesh has just passed. Soon after he was sworn in, Madhya Pradesh chief minister Kamal Nath also suggested a law reserving the bulk of jobs for the local population. Apart from what this will do to states like Uttar Pradesh and Bihar that have a very large number of people migrating in search of jobs, what is more worrying is the potential spillover to other areas. In the power sector, for example, several state chief ministers are reluctant to let electricity be ‘exported’ to other states by units that are located within their boundaries—not allowing this ‘export’ lowers domestic prices—and moves such as the Andhra-for-Andhraites will only spur similar moves by other states. Indeed, last year, both Andhra Pradesh’s then chief minister Chandrababu Naidu and Karnataka’s then chief minister Siddaramaiah raised the issue of southern states subsidising the northern ones by contributing more to the central tax kitty.
Passing a law and implementing it, though, are not the same thing. Even in the case of Andhra Pradesh, the new law exempts industries like fertilisers, coal, pharmaceuticals, petroleum and cement for now; and it is likely that the stipulation does not extend to the IT industry.
Maharashtra, similarly, introduced a law over a decade ago on reservations for those units that availed of state incentives, but the law was never really implemented. And when Karnataka planned a 100% reservation for Kannadigas in blue-collar industries—both infotech and biotech were kept out of its purview—this was given a quiet burial later. At a time when all states are competing to attract investment, it is difficult to see how such a policy that makes it more difficult for industry to work can possibly be implemented in both letter and spirit.
Also, if it is implemented in earnest, it is unlikely it can stand legal scrutiny since it violates both Article 14 (Right to Equality) and Article 16 (Right to Equal Opportunity). It seems more a political ploy right now, but it is a good idea to keep a close watch on how things pan out.