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Haryana chief minister Manohar Lal Khattar in an interview to this newspaper, defended his government’s decision to legislate reservation of jobs for locals in the private sector. His case rests on two pillars. It’s the state’s responsibility to provide job opportunities, and the advent of GST has catalysed this reservation policy. Let’s deal with GST first. It moved India’s indirect taxation system from an origin-based one to a consumption-based one. It did impact states with a large manufacturing base that incurred upfront costs to encourage industrialisation. However, the issue was addressed and compensation provided.

Therefore, it’s incorrect on Khattar’s part to use GST as a reason to provide domicile-based reservation in the private sector. As for the CM’s first reason, there’s a much larger trend at work that is affecting not just states in India but also every other economy. We are in the midst of the fourth industrial revolution that is accelerating automation of manufacturing processes. Consequently, there’s a relative decline in the need for labour. A World Bank study said that between 1994 and 2011, the share of manufacturing in total employment declined in most countries. Even countries where the manufacturing sector expanded relative to GDP were not immune.

In India, Azim Premji University researchers found that, after adjusting for inflation, Rs 1 crore investment in 1994 could absorb 33 factory workers, but by 2015, the figure was down to just eight workers. Job reservation for locals is not going to reverse this trend. Instead, it will harm the entire country by sparking a chain reaction across states. So, what can states do? Here, Khattar needs to reorient Haryana’s focus on creating opportunities for locals. Technological changes are making the quality of human capital relevant to investment. It’s in this area, India needs to do much better.

The way forward for states is to invest far more in education and skilling to make the youth more employable. Technological change, across industrial revolutions, ended some kinds of jobs but not work. Chief ministers need to help the young prepare for work through skilling programmes that help them adapt.

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This piece appeared as an editorial opinion in the print edition of The Times of India.



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