Junk this bill: Industry leaders slam Karnataka's job quota for locals

Many industry leaders said the state government's decision will impact business activities in the state and may even force some to relocate to other states. File photo

The Karnataka government's move to reserve jobs in the private sector for locals has faced sharp criticism from industry leaders, who argue that the measure will deter talent and investment from flowing into the state.

On July 15, the Karnataka cabinet approved a draft bill mandating that 50 percent of management jobs and 70 percent of non-management roles be reserved for locals in the private sector. Additionally, the state government endorsed a 100% quota for Kannadigas in Group C and Group D jobs (blue-collar workers) in the private sector.

Many industry leaders said the state government's decision will impact business activities in the state and may even force some to relocate to other states.

Also, read: Karnataka cabinet approves draft bill mandating 50% reservation for locals in management jobs, 70% in non-management categories

Kiran Mazumdar-Shaw, executive chairperson of Biocon Limited wrote on X: "As a tech hub we need skilled talent and whilst the aim is to provide jobs for locals, we must not affect our leading position in technology by this move.  There must be caveats that exempt highly skilled recruitment from this policy”.

Former Infosys CFO TV Mohandas Pai also slammed the draft bill. "This bill should be junked. It is discriminatory, regressive, and against the Constitution. This is a fascist bill as in Animal Farm, unbelievable that @INCIndia can come up with a bill like this- a govt officer will sit on recruitment committees of the private sector? People must take a language test?" he wrote on X.

"Industry and companies will push back against this bill," said Shriram Subramanian, founder and Managing Director of InGovern Research Services. The societal impact on the psychology of citizens (both Karnataka domicile and those outside Karnataka) will be huge. Karnataka doesn't have enough talent. Industry and jobs will move out of Karnataka. This sets a bad precedent." he added.

Not in the right spirit

Industry leaders pointed out that the Punjab and Haryana High Court quashed a law guaranteeing 75 percent reservation in private sector jobs for residents of Haryana.

The law, enacted by the Haryana government in 2021, made it mandatory for employers in the state to reserve 75 percent of jobs with a monthly salary of less than Rs 30,000 for state residents.

According to legal experts, the draft bill violates both Article 14, which guarantees equality of all citizens, and Article 19, which grants every citizen the right to reside and work in any part of the country.

Also, read: Karnataka’s Misguided MNC Mandate: Putting politics over progress

RK Misra, co-founder of Yulu and co-chairman of ASSOCHAM, said, "If the government forces companies to hire only locals, they will likely relocate to places like Pune and Hyderabad. Many corporate leaders in Bengaluru are already upset and frustrated due to inadequate infrastructure such as roads, water, and sewerage systems provided by the government. Now, the government is preventing them from hiring the right talent, leaving them with two options: either shut down or relocate.'"

"To aid the unskilled and unemployed effectively, exempting IT/BT, GCCs, and startups from such regulations is crucial to maintain their global competitiveness and prevent relocation," Misra said.

Also, read: Karnataka’s domicile-based reservation is a bad idea that will fail in court

He suggested a government-funded 3-month internship/apprenticeship program to address Karnataka's skilled manpower shortage, allowing companies to assess and hire suitable candidates.

Nooraine Fazal, co-founder and CEO of Inventure Academy, said: "In a globalized world, we need and want the best person for a specific role. Every role requires a combination of technical and non-technical expertise (communication, collaboration, creativity, critical thinking, people management, etc.). This law sends the wrong signal to the community."

She urged the government to prioritise investing in education, entrepreneurship, and upskilling initiatives to ensure equal opportunities for all citizens to succeed.

Revathy Ashok, CEO of NGO Bangalore Political Action Committee and an angel investor, warned that Bengaluru's status as a global tech city, driven by its rich talent pool, could be jeopardised by these regressive measures.

She cautioned that such steps will deter investors due to negative media attention, potentially leading investments to relocate to regions known for attracting top talent. "The government should invest more in top-tier education and local talent development instead of resorting to knee-jerk reactions".

Also read: Karnataka set to be the first state to come up with GCC policy by August

An industry veteran, speaking on condition of anonymity, told Moneycontrol: 'This is a disaster. Karnataka, with the largest number of GCCs and expectations for more investments, faces a looming scare. The government's underlying philosophy is detrimental to Bangalore/Karnataka's brand. We certainly don't need another regulation to contend with. This move will undoubtedly lead to significant chaos and prompt a reassessment of activities directed towards Karnataka. Talent hubs aren't built through reservation policies. First, a GCC policy promotes opportunities for new companies, only to be restricted by this decision. We seem adept at taking one step forward and one step back.'"

However, pro-Kannada organisations welcomed the Karnataka State Employment of Local Candidates in the Industries, Factories and Other Establishments Bill, 2024. They said that  it will create more job opportunities for locals. Labour department officials said that while the cabinet has approved the draft bill, it is yet to be tabled in the legislature.

Karnataka is home to more than 5,500 IT and ITES (Information Technology and Enabled Services) companies and around 750 multinational companies. The IT and ITES industry in the state provides direct employment to more than 1.2 million professionals and generates over 3.1 million indirect jobs.

Karnataka's share of software exports, nearly 40% of the country's total, solidifies its position as a global IT powerhouse. The state also hosts around 40% of Global Capability Centers (GCCs) in India.

Also, read: Karnataka to conduct Global Investors Meet in Bengaluru from Feb 12-14 next year