On February 17, 2022, the Supreme Court of India overturned a decision by the Punjab and Haryana High Court to suspend a contentious state law. This law mandated a 75% reservation for local youth in private sector jobs with salaries under ₹30,000 per month. The High Court was granted additional time to review the case, as the previous ruling lacked adequate technical justifications for nullifying the law.
Key Points
- Several industry associations have expressed concerns that the law in question could impact India’s economic unity.
- A recent decision by Justices L. Nageswara Rao and P.S. Narasimha overturned a previous stay order issued by the High Court on February 3.
- The basis for overturning the stay was the High Court’s perceived lack of sufficient reasoning in its decision.
- The Bench emphasized that every law passed by the legislature is assumed to be legal, and any court-issued stay order should be well-grounded in reasoning.
- The High Court’s decision to halt the implementation of the Haryana law on February 3 was criticized for lacking these sufficient reasons.
History
- The Madhya Pradesh government recently implemented a policy requiring that 70 percent of job opportunities go to local residents within the state, although this regulation does not apply to all private companies. Following suit, Andhra Pradesh became the pioneer in introducing a similar provision in the private sector, as the Jagan Mohan Reddy government passed a bill in the assembly, establishing a 75 percent quota for local Andhra Pradesh youth in private sector jobs.
- The Andhra Pradesh Employment of Local Candidates in Industries / Factories Act of 2019 was officially approved by the assembly on July 22, 2019. Maharashtra also has a law in place that obliges industries receiving state government incentives to ensure that 70 percent of employees at a specific level are local residents.
- Furthermore, Karnataka’s 2020 industrial policy aimed to secure a minimum of 70 percent employment for Kannada-speaking individuals overall, with the possibility of reservation going up to 100 percent in some cases.
Present Scenario
The Punjab government is set to introduce a new law aimed at offering nearly 100% job reservations to local residents in both public and private sectors. This move is part of their plan to open up around 100,000 job opportunities within the next 45 days. Additionally, the government is keen on fostering a favorable atmosphere for the youth to engage in entrepreneurial activities and start businesses in Punjab.
Local Reservations
- The idea of a “local reservation” policy emerged from concerns about job shortages and the need for governments to address the concerns of their local constituents. This policy dictates that when jobs are created in a particular state, they should first be offered to residents of that state. It appears that the government introduced this policy to alleviate the fears of some locals who worry about non-residents taking their jobs.
- This policy argues that it’s the state’s duty to fulfill the dreams and expectations of its people. Such policies might be necessary for states to achieve a higher level of equality, aligning with the constitutional goal of ensuring equality for all citizens. It’s well within the rights of the government to request the private sector to support this policy, especially since private industries rely on public infrastructure.
- While companies in some countries, like the United States, aren’t mandated to establish quotas, they can be held accountable through legal actions, including monetary penalties and court-ordered remedies for those who experience discrimination. In Canada, the Employment Equity Act safeguards minority groups, particularly indigenous peoples, from discrimination in federally regulated industries and the private sector.
Criticism: There are many –
Preserving Unity in Diversity: This policy could potentially harm the concept of “unity in diversity” by creating divisions between local and non-local individuals, posing a threat to the country’s social cohesion.
Economic Recovery Priority: In the post-pandemic scenario, it is essential for states to focus on practical measures for economic recovery. However, mandating companies to hire only locals might compromise the quality of the workforce and impede the economic recovery process.
Deteriorating Investment Appeal: Such a policy discourages people from investing in a state, diminishing its attractiveness as an investment destination. In the long run, this could harm the state’s economic interests.
Business Freedom Impacted: This policy encroaches on business freedom. For a thriving business environment, there must be clear policies and well-defined guidelines in place.
Exemptions Under Official Discretion: Officials will decide whether a company can hire an outsider or train local candidates. This discretion can impact the hiring decisions of businesses.
Labor Advantage in India: The Indian economy holds a comparative advantage in labor, being a labor-intensive country. Rural labor often migrates to urban areas for work at lower wages. Restricting jobs to locals may lead to economic losses due to higher labor costs.
Anti-Competitive Effects: This policy contradicts the spirit of competition, as less skilled local candidates might secure jobs over highly skilled non-locals.
Constitutional Violation: This policy may violate various constitutional provisions, including Article 14, 16, and 19(1), in one way or another.
Summary
The Government’s primary emphasis should be on improving education, creating more substantial job opportunities, and enhancing people’s skills. By doing so, it will naturally lead to increased employment opportunities for local youth within companies. Instead of implementing short-term policies, the focus should be on making the state’s young workforce more employable through strategic investments in education, healthcare, and skill development. This approach is more likely to foster stronger connections with the private sector.
