Gurugram Inc won’t expand in Haryana anymore, eyeing hubs like Noida now

There was a palpable change in the direction India was taking in the last six months. Haryana government has put fears in the industry.

Representational image | Udit Kulshrestha/Bloomberg

With its job reservation bill, the Haryana government led by BJP Chief Minister Manohar Lal Khattar has scored a self-goal. Haryana will lose out in the end if it goes ahead with its plan to reserve 75 per cent jobs in the private sector for the local people. While there are several challenges to implementing it, the real worry is that companies will abandon Haryana. The industry fears that Haryana, from being a competitive, attractive state, would become an uncompetitive, unattractive state to do business in.

It will lead to flight of capital from Haryana

The obvious example is Gurugram, Haryana’s most dynamic hub of job creation and industrial growth. Gurugram has become globally competitive on the back of IT and IT-related services. Because of this, people in Haryana have benefited enormously from this prosperity. Gurgaon is an amazing miracle, like Bangalore. And those who think it’s a small bunch of IT people are mistaken. The economic multiplier works in such a way that a person in an upwardly mobile job creates 3-5 indirect jobs through consumption. And local people benefit from that job. The prosperity runs right through the economy. With this new law, top persons in the information technology industry have already begun to talk about Noida and other places to expand their businesses in. Their regional headquarters may stay in Gurugram, because the law does not affect existing industries, but many big companies are saying they just will not be able to operate under the circumstances of this reservation.

In another industry in Gurugram, I know of a design-based company that needs highly skilled designers. During its hiring process last week, the company managed to find one such person, but she was living in Noida. Since her salary was below Rs 50,000, the company would not be able to hire her under the new law. Yes, the law does allow exceptions, but they’re afraid the process of seeking approvals would mean delays, corruption, and the whole burden of managing a new form of license raj. Since they need highly skilled people, they usually find them in different corners of India. In their case, exception-seeking would have to be the rule. Since their main capital is skilled human capital, not a big factory, they feel it would make sense to just move their business out of Haryana. So, what we are looking at is a flight of capital from Haryana.

A new form of License Raj will bring anxiety to job seekers

After all the fine work Haryana has done for the ease of doing business, which attracted masses of companies, it is now taking a step in the opposite direction. With this law, the  government has enhanced the discretionary power of officials. In the process, it has landed its officials with a headache — how to decide if someone is a Haryanvi? What about a person whose one parent is from next door in Delhi or neighbouring Punjab or UP and the other parent is from Haryana? What about the case where one eighth of your blood is non-Haryanvi? Officials in Nazi Germany used to face this dilemma, and a person with even one sixteenth Jewish blood was considered a ‘Jew’ and would be killed.

In order to implement this law, state officials will ask you for proof if you are a Haryanvi. This will create anxiety among all job-seekers. How will a poor Haryanvi get such a proof in a country without documents? Even upper and middle class people don’t have marriage certificates. Suddenly, you will make a person of mixed blood into a despised foreigner. An industrialist with a moral conscience doesn’t want to be part of a mindset that divides Indians — demonising some people, valorising others. Another reason why many will leave Haryana.

It will fail in the courts

Before this happens, however, industry will go to court, and argue that it is illegal. Deputy Chief Minister Dushyant Chautala’s article in ThePrint says that the government is within the law but there’s enough legal precedence to show that it violates Article 14 on ‘equality before law’ and Article 19, which allows everyone to live and work anywhere in the country. Even the Andhra Pradesh case, which is in the high court, is likely to be struck down. Haryana’s politicians, indeed India’s politicians know this well and this is the cynicism behind this move. They will go back to their constituencies and say to the people, ‘Look, we tried to do it, but our hands were tied. We couldn’t do it because of the wretched courts’.

It undermine’s Modi’s vision of one India 

This law is especially embarrassing to Prime Minister Modi and his vision of ‘one India’. It’s a slap in the face of the Rashtriya Swayamsevak Sangh (RSS), when its own chief minister in a BJP ruled state is creating ‘tukde tukde’. The 75 per cent domicile law demonises the migrant. Many of us remember the damage the Shiv Sena has done to the ‘open arms’, cosmopolitan culture of Mumbai. In support of jobs for Maharashtrians in the 1970s, it demonised South Indians, beating Tamils in Matunga and Dadar. In the 1980s, Shiv Sainiks started attacking Sikh taxi drivers. In the ’90s, it was the turn of the Biharis and UP bhaiyas.

This is real ‘tukde tukde’ because you are no longer proud to be an Indian — the regional identity supplants national identity. As the feeling of being Indian fades, you begin to see the migrant worker as ‘a foreigner in my state’. It’s a pity because studies on migration show that migration is a symptom of a nation’s dynamism. Not only will this law bring economic loss, it will promote social disorder. The irony in all this is that Haryana, more than any other state, has benefitted because it was part of something bigger — because of its proximity to Delhi and Chandigarh. From a sleepy village, Haryana became part of greater Delhi/NCR, benefitting enormously from the energy and prosperity of the whole region.

It will slow national recovery

There has been a palpable change in direction in the last year at the Centre. Modi has finally begun to deliver on the reforms that brought him to power in 2014. There have been reforms in labour laws; the corporate tax rate has been reduced to levels that are now in line with our competitor nations; there has been an investment-oriented, job-creating Budget. Even as political parties were clamouring for Covid giveaways, the Modi government did the right thing for the long term — choosing to create jobs. The reforms in agriculture are our ‘1991 moment’. Despite opposition from vested interests — rich farmers and arhatiyas in Punjab and Haryana — the government hasn’t caved in. Finally, to get money for Budget 2021, the government has bitten the bullet, gone for privatising the holy cow, the public sector. Yes, privatising! No euphemisms, no reform by stealth. This has changed the mood of the industry. We can now begin to believe in the serious business of growth. But in one go, this proposed reservation law could undermine this mood, creating doubts in the minds of investors: is India once again returning to the bad ways of the old license raj?

Haryana govt’s claims don’t hold

The reasons given by Dushyant Chautala are specious. The law will not benefit employers; it will harm them. He says that the new law will provide a qualified workforce, which will enhance efficiency. But only if you hire the best available do you enhance efficiency. If you are forced to hire local people and if they are not equal to the best available, then you are limiting yourself. Dushyant Chautala also talks about reducing absenteeism. The reality is that migrants have less day-to-day absenteeism; they are more motivated than the local people. Also, his claim that the law will reduce crime rate is basically saying that migrants are responsible for crimes. This too is a false claim. He is playing with fire when he demonises migrants, as the Thackerays did in Bombay. This will only bring violence to Haryana and make it less attractive for investment.

Dushyant Chautala says that other states are doing it. Well, two wrongs don’t make a right. Besides, the courts will throw out those laws in all the states. He has mentioned a ‘sunset clause’ of ten years , which is a good thing. All laws should have a sunset clause. But the reality is that it’s very difficult to roll back something once you have given it. Politicians know it. After 10 years, politicians will find ways to extend the law, knowing that undoing cheap populism is equal to committing political suicide.

Why are bad, self-defeating laws legislated?

Politics and economics don’t converge necessarily. Economic policy delivers in the long term — it’s a five-day Test match. But politics is short-term game — it’s a T20 match. In politics, you have to get elected at any cost, and you have only a few years to deliver. Thus, the interests of politicians and economic reformers are often different. A politician, like NT Rama Rao, got elected by promising Re 1/- rice and he bankrupted the Andhra Pradesh treasury. Punjab’s politicians promised free electricity to farmers, again bankrupted the state, but also through excess use of water made one of the richest states significantly poorer. Because of the mismatch, it is difficult to do reforms in a democracy but it’s also why self-defeating laws like the 75 per cent reservation in Haryana are enacted.

Gurcharan Das is an author and former CEO of Procter & Gamble, India. Views are personal.