DECEMBER 23, 2018

By TIOL Edit Team

MIXED signals for Job market reforms are emerging from the Centre and the States. NITI Aayog has generated positive signals through its Strategy for New India @75 report. It has pitched for a slew of initiatives to reform labour markets &to create employment opportunities across the country.

The reforms, if implemented as package and as per NITI's timelines, can help India improve its labour productivity as well as total factor productivity. The package includes: Complete codification of central labour laws into four codes by 2019; work with the States to introduce flexibility in labour provisions across sectors and to speedily implement fixed term employment (FTE) mechanism.

A negative signal has, however, emanated from Madhya Pradesh. Its New Chief Minister Kamal Nath has decided to reserve 70 percent of jobs in industries for domiciled persons of the State.

While announcing the decision, Mr. Nath reportedly observed: "Lot of industries are set up which employ people from other states, like Uttar Pradesh and Bihar. I don't want to criticize them, but the young people of Madhya Pradesh remain deprived".

This statement unleashed a political war of words on expected lines. BJP & regional parties from Uttar Pradesh and Bihar trained their guns at Mr. Nath. This is notwithstanding the fact that several States already have similar job reservations for the local people.

BJP-ruled Gujarat, for instance, requires incentives-availing industries to employ domiciled persons at 85% of total jobs. Similarly, BJP-Shiv Sena-ruled Maharashtra has pegged this reservation at 80%. Himachal Pradesh provides for at least 70% jobs reservation in industries on similar ground. It has extended this provision to hydro-power projects too.

Karnataka Government, under Congress Party, was last year pursuing a proposal to reserve 100% of blue-collared or lower category jobs for domiciled persons.

Different States have different policies to reserve jobs for locals or to induce project promoters to give preference to local hands.

The second negative signal is emerging from Uttar Pradesh Government, which is expected to divide Other Backward Classes (OBCs) quota of 27% into three sub-categories of castes group on the basis of degree of backwardness as recommended by an official panel.

Like Yogi Government, Modi Government also constituted a commission to sub-categorize OBCs for division of 27% OBC quota in domain of Central jobs. The Commission is yet to submit its report. A few States have already divided OBC quota into different sub-categories.

As employment generation is not keeping with pace with demographic requirements, politicians find it convenient to add more castes/tribes within their respective ceiling for scheduled castes, scheduled tribes and OBCs.

The demand for reservations from excluded communities including Dalit Muslims and Christians is also very much live in certain States.

Yet another negative signal came recently from within UP. In August this year, The Bharatiya Kisan Union (BKU), in Muzaffarnagar district warned workers from other districts to leave employment at factories within the district, or be "forced to leave" within a month. BKU urged district administration to direct factory managements to give preference to domiciled persons of Muzaffarnagar that faced acute unemployment.

Such threat materialized in Gujarat where migrant workers from Bihar and Eastern Uttar Pradesh left the State amidst fear of violence from local citizens. Such adversity against outsiders and growing demand for reservations can become barrier to growth and jobs creation.

Remember how Goa scrapped several proposed SEZ projects a decade back to prevent influx of migrant workers in its territory.

Reservations & aversion to migrants have thus become a wheels-within-wheels puzzle for advocates of high-paced growth. Jobs quotas can slow down economic development. They can also weaken national integration.

What is the impact of complex, multi-tiered web of reservations on the mobility of and productivity of labour? The Union Government should discuss this issue urgently with the States at Inter-State Council or at the Governing Council of NITI Aayog.

There is certainly a case for reserving jobs for domiciled citizens, many of whom suffer directly or indirectly due to implementation of projects in areas where they reside. There should, however, be a uniform ceiling across all States. Let this ceiling, say, be 40-50% of jobs in an industrial unit.

The operation of the unit should, however, not suffer for want of suitable local hands.

The clam our for reservations would gradually recede if the country is able to attain at least 10% growth in GDP year after year for two decades. This can be achieved only with good governance and national discipline. For this, the Government has to shift focus from politics to timely action on all fronts - from top to the bottom.

This is a herculean task.