Why local quota in private sector is not a good idea

A better way to engage with the private sector would be to make the youth of a state employable with proper investments in education, health and skill development

Madhya Pradesh chief minister Kamal Nath recently said the state government is mulling a law to ensure that 70% jobs in the private sector go to local youths. Such a demand for reservation is not new: In 2018, Gujarat chief minister Vijay Rupani said that his government would bring a law to make it mandatory for manufacturing and service sector entrepreneurs to hire 80% of their workforce from the state. In the same year, Maharashtra Navnirman Sena chief Raj Thackeray, known for his scathing attacks on the North Indian community and migrants from Uttar Pradesh and Bihar, said that youth from the state should be given priority if there are any job opportunities in the state.

It’s not too difficult to understand --- and appreciate --- the reasons behind demands for reservation for locals: First, the agrarian sector is under tremendous stress across the country, and young people are desperate to move out of the sector. But there is a serious dearth of jobs (private and government). Second, the Centre and many state governments probably doubt the robustness in the industry’s efforts when it comes to affirmative action. Several reports --- for instance, the State of Working India 2018 released by the Centre for Sustainable Employment of the Azim Premji University --- have shown that discrimination is one of the reasons for under-representation of Dalits and Muslims in the corporate sector. Third, pure politics; the demand --- jobs for locals only --- are bound to go down well with the electorate.

While the impulse of politicians is understandable, local reservation in the private sector may not be the ideal solution to tackle the unemployment crisis; in fact, it can deter the corporate sector from investing in states that come up with such a rule.

A better way to engage with the private sector would be to make the youth of a state employable with proper investments in education, health and skill development. Madhya Pradesh chief minister Kamal Nath is well aware of the importance of such critical investments. He set up skill development and training centres in his constituency Chhindwara in Madhya Pradesh years ago. I visited one of such institute during a reporting trip before the 2014 general elections, and I thought they were extremely forward-looking interventions by the CM. The idea of reservations for locals also goes against the established fact that migration of labour is good for the economy. Many Indian states, Punjab, Gujarat, and Maharashtra, to name a few, have benefited from migrant labour.

Last, but not least, it is clear that private sector participation is crucial to meet the development goals of countries. This is one of the key points of the Sustainable Development Goals agenda. India has played an important role in shaping the SDGs, and so central and state policies have to align with these goals. In such a scenario, chief ministers would do well to engage with the private sector in a much more holistic manner, and not burden it with unfeasible rules.