Big business curbs India's populist instinct
The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates to add graphic.
By Shritama Bose
MUMBAI, July 22 (Reuters Breakingviews) -India’s jobs crisis is rearing its ugly head. The southern state of Karnataka last week climbed down from a plan to force companies to hire within its borders for up to 50% of management roles. The U-turn is a relief to global firms who bring talent from across the country into the state capital Bengaluru. But any respite may prove fleeting.
A backlash against the idea largely played out on social media platform X. IT industry association Nasscom said the law could cause companies to relocate. Politicians invited employers to set up in their states instead. Within hours of Reuters publishing its report outlining the draft bill, Karnataka Chief Minister Siddaramaiah insisted the new rules were only a work in progress.
Such quotas have some precedent in less globally high profile states such as Andhra Pradesh and Jharkhand. In November, a court overturned northern state Haryana’s jobs quota on grounds that it violated India’s constitution. Karnataka, though, is India’s second-largest destination for inbound foreign direct investment after Maharashtra, home to the financial capital Mumbai.
Employers will raise their guard. Karnataka hosts 30% of the country’s global capability centres including Goldman Sachs' GS.N biggest workforce outside New York. The presence of tech giants from Apple AAPL.O to Google-owner Alphabet GOOGL.O have earned Bengaluru the moniker of India’s Silicon Valley but its infrastructure is creaking and living costs rising; global firms are increasingly finding a cheaper and reliable workforce in Indian cities beyond the tech hub.
Politicians are in a mood to sweeten the rules to attract job-creating investment but the good times don't always last. Karnataka tweaked labour laws last year to smooth iPhone production after Apple and its supplier Foxconn 2317.TW lobbied for changes. Tamil Nadu, another iPhone-making state, put a similar change on hold following pushback from worker unions.
India's jobs crisis was partly responsible for robbing Prime Minister Narendra Modi’s party of its parliamentary majority in June and it will keep troubling businesses. Unemployment rose to 8% in April per think tank the Centre for Monitoring Indian Economy, but that understates a complex problem: A lack of good-quality jobs. Meanwhile, companies complain of a shortage of skilled talent. Deadly student protests this month in neighbouring country Bangladesh over employment opportunities and quotas illustrate how bad things can get if left unaddressed. For now, India's business lobby is a strong defence against politicians' populist instincts.
Follow @ShritamaBose on X
CONTEXT NEWS
India’s Karnataka state’s draft bill mandating job quotas for locals at private companies is still in the preparation stage, Chief Minister Siddaramaiah said on X on July 17. The cabinet will discuss the issue at its next meeting to make a final decision, he added.
The proposed bill requires employers to give 50% of management jobs and 70% of non-management jobs to candidates from the state, Reuters reported earlier the same day, citing the draft document.
IT industry body Nasscom said the state’s mandate, if enforced, could force companies to relocate due to a shortage of local skilled talent.
Graphics: Bengaluru hosts one third of India's back-office jobs https://reut.rs/4d7dm6z
Additional reporting by Aditya Srivastav and Ujjaini Dutta; Editing by Una Galani and Aditya Srivastav
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