Editor's Pick: Haryana sees investments dip amid worries over local job reservation law

Once one of the most sought-after investment destinations, particularly for skill-driven manufacturing sectors such as automobiles, Haryana might have lost some of its sheen, with its share of new investment projects in the country tripping to a six-year low of 1.06% in 2022-23, down sharply from almost 3% the year before. Last year, total investment outlays announced in the State fell 30% to ₹39,000-odd crore from nearly ₹56,000 crore in 2021-22. This pushed Haryana from the ninth-best State in terms of new investment projects to the 13th rank in 2022-23. Significantly, manufacturing investments declined by 60% to just about ₹9,500 crore. This decline in new investment in projects coincides with the State government’s enactment of a law in early 2022 to reserve 75% of private sector jobs with monthly salaries up to ₹30,000 for local people, meaning those domiciled in Haryana. While the law has been kept in abeyance and faces challenges to its constitutionality in courts, uncertainty over its implementation remains a worry for investors. Expressing skepticism about the law, industry bodies and industrialists in the State said they feared that it would affect the competitiveness of private businesses by artificially controlling their internal functioning. They said that it will also impact the ease of doing business in the State, besides increasing the compliance burden on employers. Incidentally, The Federation of Indian Chambers of Commerce and Industry (FICCI) said after the law’s introduction that it would “spell disaster” for private investment in the State and impede industrial development. For instance, Maruti Suzuki — one of the State’s largest legacy investors, which announced a ₹18,000-crore project, Haryana’s largest investment in 2021-22 — is now eyeing a ₹24,000-crore plant that will come up elsewhere. Meanwhile, compared to 2021-22, when manufacturing, industrial parks, roadways and realty projects dominated the State’s largest investments, realty projects dominated the outlays announced in 2022-23. Notably, construction projects tend to create more jobs for lower-skilled migrant workers. Shashikant Hegde, director and CEO of investment monitoring firm Projects Today told The Hindu that one of the reasons behind the fall in fresh manufacturing investments in the State could have been the mandatory local employment law. It is important to note that Haryana is not the only State to come up with such a law. Andhra Pradesh and Jharkhand have also introduced such laws, while the ruling DMK in Tamil Nadu had promised 75% reservation in its election manifesto for the 2021 Assembly polls. While industry scepticism about such laws may not be misplaced since skilled talent for specific industries would not necessarily be concentrated in the State they operate in, such laws may also not be sound public policy. While it is natural for governments to focus on job creation, especially in the post-pandemic era, job reservation for locals does not address the root cause of the lack of local jobs. Rapid urbanization on one hand and the agrarian situation on the other are behind large-scale migration of workers in search of employment. The real issue to address is the widespread disparities between urban and rural areas, between advanced States and backward ones, so that adequate employment opportunities can be created in every region. Was this newsletter forwarded to you? Head over to our newsletter subscription page to sign up for Editor’s Pick and more. Click here. 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[Arrow]( [Open in browser]( [Mail icon]( [More newsletters]( Haryana sees investments dip amid worries over local job reservation law Once one of the most sought-after investment destinations, particularly for skill-driven manufacturing sectors such as automobiles, Haryana might have lost some of its sheen, with its share of [new investment projects in the country tripping to a six-year low]( of 1.06% in 2022-23, down sharply from almost 3% the year before. Last year, total investment outlays announced in the State fell 30% to ₹39,000-odd crore from nearly ₹56,000 crore in 2021-22. This pushed Haryana from the ninth-best State in terms of new investment projects to the 13th rank in 2022-23. Significantly, manufacturing investments declined by 60% to just about ₹9,500 crore. This decline in new investment in projects coincides with the State government’s enactment of a law in early 2022 to [reserve 75% of private sector jobs]( with monthly salaries up to ₹30,000 for local people, meaning those domiciled in Haryana. While the law has been kept in abeyance and faces challenges to its constitutionality in courts, uncertainty over its implementation remains a worry for investors. Expressing skepticism about the law, industry bodies and industrialists in the State said they feared that it would affect the competitiveness of private businesses by artificially controlling their internal functioning. They said that it will also impact the ease of doing business in the State, besides increasing the compliance burden on employers. Incidentally, The Federation of Indian Chambers of Commerce and Industry (FICCI) said after the law’s introduction that it would “spell disaster” for private investment in the State and impede industrial development. For instance, Maruti Suzuki — one of the State’s largest legacy investors, which announced a ₹18,000-crore project, Haryana’s largest investment in 2021-22 — is now eyeing a ₹24,000-crore plant that will come up elsewhere. Meanwhile, compared to 2021-22, when manufacturing, industrial parks, roadways and realty projects dominated the State’s largest investments, realty projects dominated the outlays announced in 2022-23. Notably, construction projects tend to create more jobs for lower-skilled migrant workers. Shashikant Hegde, director and CEO of investment monitoring firm Projects Today told The Hindu that one of the reasons behind the fall in fresh manufacturing investments in the State could have been the mandatory local employment law. It is important to note that Haryana is not the only State to come up with such a law. Andhra Pradesh and Jharkhand have also introduced such laws, while the ruling DMK in Tamil Nadu had promised 75% reservation in its election manifesto for the 2021 Assembly polls. While industry scepticism about such laws may not be misplaced since skilled talent for specific industries would not necessarily be concentrated in the State they operate in, such laws may also not be sound public policy. While it is natural for governments to focus on job creation, especially in the post-pandemic era, job reservation for locals does not address the root cause of the lack of local jobs. Rapid urbanization on one hand and the agrarian situation on the other are behind large-scale migration of workers in search of employment. The real issue to address is the widespread disparities between urban and rural areas, between advanced States and backward ones, so that adequate employment opportunities can be created in every region. Was this newsletter forwarded to you? 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