Indian states fight each other for jobs with laws to hire locals.

A slowing economy and a shortage of new jobs have led northern Haryana state to implement a new law last month that restricts private companies from hiring workers from other states. Enacted by a government-controlled by Prime Minister Narendra Modi’s ruling Bharatiya Janata Party, such laws instantly become popular with other states.

This law in Haryana has heightened concerns among foreign business groups and urged them to look elsewhere. One Korean logistics company that lately shifted operations to Gurugram is now making up alternate plans because its experienced workforce doesn’t meet the new law provisions.

“The current restriction is something opposite of ease of doing business,” said Hee Chul Jung, secretary-general of the Korean Chamber of Commerce and Industry in India. “The new regulation could frighten future investors away that support flexibility and a dynamic business environment.”

The number of jobs was lost during last year’s nationwide lockdown, leading to a setback to Modi’s promise of generating sufficient employment for the world’s youngest and most prominent workforce as the economy suffered its worst recession since 1952. More states are urging companies to hire local, setting up internal trade restrictions that could further limit growth in Asia’s third-biggest economy.

The Andhra Pradesh southern state led the way in 2019 to reserve jobs for locals in factories. The mines-rich state of Jharkhand then adopted a similar policy last month. Simultaneously, a top regional party in Tamil Nadu has also declared a job-protection plan to win upcoming elections.

The law in Haryana took effect last month. It provides a 75% quota for job seekers from the northern state for posts in private companies with a monthly salary of fewer than 50,000 rupees ($683).

‘Slippery Slope’

While the laws are intended at supporting young workers, labor rights advocates have warned they aren’t compliant with constitutional guarantees, including freedom of movement, a right to livelihood, and no discrimination based on place of birth.

“The way the Haryana law stands, it looks excessive and of an excluding nature,” said Tanima Kishore, an advocate in the Supreme Court of India, who has worked on labor rights. “It can be challenged on the ground that it violates people’s constitutional right to carry on any occupation or trade in any part of the country.”

Apart from potential legal flaws, the law risks driving away companies that have supported to make Gurugram attractive. The city is a center for offshore back-office operations and requires a workforce highly proficient in the English language. This skill may not be simply available in any one state.

“It is a slippery slope,” said Jean Dreze, a visiting professor with Ranchi University in eastern India. “If many states follow these policies there is a risk of unfavorable effects on employment opportunities for large numbers of disadvantaged workers.”

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