Say no to populism: Andhra Pradesh’s decision to reserve private jobs for locals will harm its economic interests

July 24, 2019,TOI
Andhra Pradesh assembly on Monday created history. Of the wrong kind. It became the first state to enact a law which reserves 75% jobs for locals in private industrial units and factories, even if a firm has not received concessions from the government. In the event locals with requisite skills are not available, companies are required to train people along with the state government, and then hire them. The law will undermine the state’s industrialisation effort following the bifurcation in 2014.

This is not the only counterproductive move of the newly elected AP government. One of the Jagan Mohan Reddy government’s early steps was to announce that it would renegotiate power purchase agreements signed by its predecessor, ostensibly to combat corruption. This could stress 5.2 GW of renewable energy projects with an estimated debt of Rs 21,000 crore, estimates Crisil. These developments need to be situated in the context of the demand by AP for temporary special category status. The underlying logic was this status could serve to pull in investments in a competitive region. However, the Jagan government’s decisions will repel potential investors.

AP is not the only state to harp on reservation for locals. Madhya Pradesh has threatened to do the same. It’s anomalous that states are willing to make the transition to GST which entails ceding unilateral control over rates for the sake of a unified market for goods and services across the country, yet put up barriers to the movement of labour which has long been customary across India, undermining in the process Article 19 of the Constitution which guarantees freedom of movement to Indian citizens. States which put up these obstacles will lose as investments flow into places where compliance costs are low and companies are allowed to hire employees they prefer. AP has sadly hurt its economic prospects.

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