75% local reservation in private jobs will derail Haryana's economic growth

The Haryana government has passed the ‘The Haryana State Employment of Local Candidates Bill, 2020’ mandating 75 percent reservations for the locals in the private sector jobs with a salary below Rs 50,000.
The new law threatens to deal a blow to the Haryana growth story and betrays the dangerously flawed understanding of the political class regarding economic growth and cities. It also demonstrates that uncertainty and arbitrariness remain the hallmark of policymaking in India.

What data or evidence is this law based on? What is the percentage of non-locals in employment below Rs 50,000 per month? What is their contribution to the state GDP? What are their surveyed skills set, and are they available locally? If not, what is the cost of building those skill sets locally, by training and education? What is the compliance cost of implementing such a massive shift in the globally-connected economy of Haryana?
First, as it turns out, no such study or data is available with the government. According to the 2011 census, the interstate migrants in the urban workforce formed a national average of only about 8 percent — much of the migration being intra-state. The law is not based on any economic rationale or sound planning. It is whimsical and arbitrary.

Second, it ignores that Haryana is a small state with a small population. Many industries have grown here because of the government's business-friendly attitude, availability of land, and proximity to Delhi. The industrial belt across Gurugram and Manesar is a hub for hundreds of companies across sectors, such as outsourcing, IT services, automobiles, consumer goods and electronics. They have backward and forward linkages all across India and rely on the free movement of labour not just for competitiveness but also for the production process itself. Any policy that fails to consider the multi-layered supply chains and interdependence of services and manufacturing is a recipe for economic disaster.

Third, cities are the engines of innovation and economic growth. Great cities such as Gurugram grow because of their ability to attract talent and labour force from all across the world. Cities and hubs of economic activity grow because of this ability to draw immigrants.
Immigration from outside is not to 'free-ride' on prosperity but is the driving force behind economic dynamism and prosperity. The benefits of curbing immigration and the growth of slums cited by the Haryana government shows an abysmal understanding of the process of economic growth and urban economics.
Fourteen out of 22 districts of Haryana are part of the National Capital Territory that includes parts of Rajasthan and Uttar Pradesh and the state of Delhi with plans to incorporate parts of Punjab. This new law fragments the economic boundary by confusing it with the administrative boundary.

Fourth, it is a significant reversal of the push for the 'one nation-one market' agenda that seeks to remove the inter-state trade and commerce impediments, and leverage economies of scale to foster competitiveness before competing in the international arena. It restricts one of the most critical factor markets; the labour market.
It also brings back the dreaded inspector raj with a vengeance when the Centre is trying to reform and simplify the labour laws via four labour codes.  This new law applies to all the companies, societies, trusts, limited liability partnership firms, partnership firm and any person employing 10 or more persons and an entity, as may be notified by the government, from time to time.
It provides for the authorised and designated officers in charge of implementing the law and review of the compliance. They have the powers to validate the company's recruitment, decide on the claim of exemptions, examine quarterly compliance report, and inspect any promise on a single day’s notice. This makes the mockery of the promise of the ease of doing business, and is the perfect synopsis for rent-seeking, harassment and corruption.

Fifth, it is the small and medium scale industries that are going to suffer the most. They are already reeling under the disruption caused by the COVID-19 pandemic. This law impacts MNCs and the small local business owners, mill owners, designers, consultancy firms, and start-ups catering to the wider Delhi-NCR region.
Haryana will suffer as more and more companies and start-ups will move out to nearby places such as Noida and adopt a work from home model mainstreamed during the pandemic.

Sixth, the law absolves the government from the accountability of reforming the education system, investing in human resource. It deflects its abysmal record by resorting to counter-productive populist measures. Crucially, the law will not extend to central government and state government-operated enterprises owned by either of them.