Andhra Pradesh’s quota for locals hurts federal spirit

State barriers against migrant workers are an unwise economic decision, and adversely impacting investments, production efficiency, and profitability

National Sample Survey Office, unemployment rate in India, Economic Survey 2017, internal migration rate, workforce in india, Jagan Reddy
The yet to be released report stated that nearly one-third of the Indian states (11) had unemployment higher than the national average in 2017-18. (Representational image)

By Ashwajit Singh

The draft National Sample Survey Office’s (NSSO) job survey for 2017-18 pegged the unemployment rate in India in 2017-18 at 6.1%, a 45-year high. The yet to be released report stated that nearly one-third of the Indian states (11) had unemployment higher than the national average in 2017-18.

The Economic Survey 2017 revealed that the annual average labour migration was close to 9 million between states during 2011-16. States like Delhi, Maharashtra, Tamil Nadu, and Gujarat attracted large numbers of migrants from the Hindi-speaking states of Uttar Pradesh, Bihar, and Madhya Pradesh. Census 2011 also reported an increase in inter-district migration (within the same state), from 30% between the 1991 and 2001 census to 58% between 2001 and 2011. Ironically, the state of Kerala, with the highest literacy rate of 93.91% as per Census 2011, recorded the maximum number of jobless people at 11.4% along with an increase in internal migration rate as per Economic Survey 2017. Possibly, a reflection of an under-skilled industry-ready workforce that is pushing locals to migrate to other regions within the country.

Factors such as work/business, education, marriage, etc, have been the key reasons cited behind such high numbers. Rising labour mobility has cut across language barriers and is more pronounced among women. Migration, thus, has demographic, social, economic and political consequences for the societies which migrants leave and the ones in which they settle.

Andhra Pradesh (AP) 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 in the required skills.

The move could hamper fresh investments in the state and deter industries in the region leading to loss of jobs and reduced economic growth. Similar to what one sees in the UK due to Brexit. While it could work initially in a developed state, in the long run, it may lead to a disparity of income and opportunities amongst the poorer states, specially the BIMARU states. Considering that nearly 20%, or 100 million, of the workforce in the country is migrant, lack of skills among the locals will further affect profitability.

While AP will become the first state to do this, similar demands have come up in different states but without any success:

In 2008, Maharashtra came up with 80% local jobs quota for state subsidies, but due to skill set unavailability with locals, it was not very successful. Similarly, Karnataka came up with the proposal for 100% local quota in 2016, but the legal department vetoed it as unconstitutional.

Real jobs are not created by law but by industries coming in the region. In the long run, subsidies and reservations may not be the key to a sustainable growth. What is required is an enabling environment that has simple investor-friendly policies, skill development and ease of doing business in the state. One has to recognise that there is a difference between passing a law and its implementation. Even in the case of Andhra Pradesh, there is a gap where 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 IT industry.

The Constitution of India allows every citizen to work, live and move freely in the country. But, with these state barriers for outsiders in place, only time will tell how states will attract more investments, increase production efficiency, profits and create uniform labour markets in the region.

The author is MD, IPE Global Limited
Views are personal

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