Tuesday, October 4, 2022
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Haryana adds to the list of economic blunders in India

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In what is likely to be added to an esteemed list of India’s historic economic blunders, Haryana government has followed in footsteps of Andhra Pradesh and has recently cleared an ordinance reserving 75% jobs in private sector for locals with some conditions.

Haryana has two of its biggest cities Gurgaon and Faridabad, in proximity to Delhi, both are reliant on people commuting from Delhi to work there and vice versa. Gurgaon being a major economic centre is home to several IT companies and high tech manufacturing units. The damage a 75% local quota being imposed on private businesses will do to economy in this state would be devastating by most optimistic estimate.

But these considerations are unlikely to bother the govt which will likely find it much easier to convince people of the state to the benefit of this quota. In reality it is more likely that industries will now shy away from Haryana and lead to a drop in job creation. This move when implemented is likely going to scare investors away from not only Haryana but away from India as a whole. No company wants to set up operations in a place where the most basic economic freedoms can be taken away by povertarian considerations. In times of a struggling economy and raging pandemic, among reforms announced by central govt to boost private investment in the country, the message these types of laws send to the world is quite opposite. This tells investor that any state in India can without any sound reason attack their economic freedoms and directly hurt their investments

But these considerations are unlikely to bother the govt which will likely find it much easier to convince people of the state to the benefit of this quota. In reality it is more likely that industries will now shy away from Haryana and lead to a drop in job creation.This move when implemented is likely going to scare investors away from not only Haryana but away from India as a whole. No company wants to set up operations in a place where the most basic economic freedoms can be taken away by povertarian considerations. In times of a struggling economy and raging pandemic, among reforms announced by central govt to boost private investment in the country, the message these types of laws send to the world is quite opposite. This tells investor that any state in india can without any sound reason attack their economic freedoms and directly hurt their investments.

Whats even more worrying is the potential of this kind of quotas turning into a trend, Maharashtra govt too has given indication that they want companies to hire locals preferentially. If more and more states start adopting these laws they can undermine the one economic advantage india has had all along, the size of its labour force. If states start restricting the flow of labour we might end up with fragmented labour markets and increase costs of labour in well off regions in india, making industry even less productive.

A case against regional quotas in the Andhra Pradesh high court, the best possible outcome to emerge from this would be if these laws are declared unconstitutional and the central govt refuses to amend the constitution to make them legal.

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