Burning Issues

[Burning Issue] Domicile Reservations in Private Sector

Two weeks back, the Haryana Governor gave his assent to the Bill providing 75% reservation in the private sector to job seekers from the state. And much recently Jharkhand government announced 75% reservation in private sector jobs with a salary of up to Rs 30,000 for locals.

Meanwhile, the Supreme Court had sought responses from all states on whether the 50% ceiling limit on reservation needs to be reconsidered.

In this edition of Burning Issues, we shall dive into what and how reservation for Private Sector would be; its repercussions on the principle of equality in our country and ultimately the performance of the private sector.

Reservation: A backgrounder

  • Reservations are an affirmative action against social discrimination prevalent in society.
  • They have had a place in India for over a century, much before they were written into the Constitution as a leg up for socially and educationally backward sections.

Private Sector: Diluting Reservation to the point of irrelevance

  • The issue of extending reservations to the private sector was occasionally mentioned in political circles whenever the issue of inadequate employment opportunities for the unprivileged in the public sector was discussed.
  • But it was never seriously debated.
  • The issue got trans-formed into demand after the country introduced structural reforms and after the acceptance of the globalisation process.

LPG era concept

  • Economic liberalisation brought in its wake a shift in emphasis from the public to the private sector.
  • It was decided to prune the size of the public sector by disinvesting capital and allowing not only Indian but also foreign private investors to invest in those areas of economic activity like power generation and distribution which were once reserved exclusively for the public sector.

Why is the demand gaining momentum?

  • There is an implicit assumption in this demand that employment opportunities are increasing in the private sector merely because it is expanding.

(1) LPG reforms

  • The policy of LPG reduced the number of employment opportunities in the public sector, which, in turn, reduced the job opportunities for backward communities.
  • A revelation of the reduction of employment opportunities in the public sector made some political parties and their leaden advance the demand for extending reservations to the expanding private sector.

(2) Populist impulse

  • The demand- jobs for locals only are bound to go down well with the electorate.
  • The leadership has been supporting the general cause of SC/STs and OBCs have only been repeating their support for the demand for extending reservations to the private sector.
  • While the political facet is a purely opportunistic political game plan.

(3) Rising unemployment

  • Given India’s population growth, each year there are close to 20 million (or 2 crore) people who enter the working-age population of 15 to 59 years. But not everyone seeks a job.
  • Just after last year’s lockdown, the unemployment rate has shot up to more than 30 percent, with 122 million people losing their jobs.

(4) Agrarian stress

  • The agrarian sector is under tremendous stress across the country, and young people are desperate to move out of the sector.
  • But there is a serious dearth of jobs (private and government).

(5) Inter-state migration

  • Every campaign for a sons-of-soil policy, for job reservation, whips up this anti “outsider” sentiment.
  • In the case of Haryana, one of the reasons given for justifying reservations was the proliferation of slums, presumably attributed to “outsiders” shifting to the State for work.

(6) Corporate preferences are biased

  • The Centre and many state governments probably doubt the robustness in the industry’s efforts when it comes to affirmative action.
  • Several reports — for instance, the State of Working India 2018 released by the Centre for Sustainable Employment of the Azim Premji University.
  • It has shown that discrimination is one of the reasons for under-representation of Dalits and Muslims in the corporate sector.

(7) Xenophobia

  • Another major reason for the appeal of jobs for locals is inherent xenophobia. This is not unique to India or Indian States, but is universal.
  • It was spectacularly manifest in the Brexit vote, when Britons thought that foreigners were taking away local jobs, and hence voted to secede from the European Union.
  • The actual facts were much less damaging. If anything, the so-called foreign workers contributed to the local economy through their productivity, and by paying both consumption and income taxes.

Why it is a bad idea?

It is worth examining why this idea is ultimately infructuous or irrelevant.

(1) Against Equality as well as meritocracy

  • It goes against the Constitution of India.
  • In fact, it violates several fundamental rights, such as freedom to move anywhere, the right not to be discriminated on the basis of place of birth, the right to be treated equally before laws and the right to pursue one’s livelihood.
  • These are enshrined variously in Articles 14, 15, 16 and 19 of the constitution.

(2) Migration criteria not justified

  • The actual data on inter-State migration shows that inter-State migration is relatively low in India.
  • While the country may have an estimated 100 million migrants, most of them are intra-state not inter-state. As per 2011 census, India had only 5.6 crore inter-state migrants.
  • They often bring skills, motivation, energy which may be in short supply or lacking locally.

(3) Free movement of labour

  • A more analytical aspect to highlight is that free movement of labour partly compensates for the uneven economic progress of different States.
  • The idea also goes against the established fact that migration of labour is good for the economy.
  • Many Indian states, Punjab, Gujarat, and Maharashtra, to name a few, have benefited from migrant labour.

(4) Un-ease of doing business

  • Local reservation in the private sector may not be the ideal solution to tackle the unemployment crisis.
  • In fact, it can deter the corporate sector from investing in states that come up with such a rule.
  • A better way to engage with the private sector would be to make the youth of a state employable with proper investments in education, health and skill development.

(5) Scapegoating the private sector

  • What distinguishes the private sector from the public sector is the inherent competition and a hunger for improvement.
  • Today, in the post-Covid era, India has a once in a lifetime opportunity to become the next manufacturing hub of the world.
  • In such a scenario, chief ministers should do well to engage with the private sector in a much more holistic manner, and not burden it with unfeasible rules.

(6) MSMEs to be hit harder

  • MSMEs could be the hardest hit.
  • They do not have the necessary capital to relocate and many studies have shown that more than 50 per cent of employees are not residents of the state.
  • Entrepreneurs worry that the reservation declared by backward states like Jharkhand could limit the scope of recruitment and have an adverse impact on productivity and competition based on merit.

Arguments in favour of quota in private

  • Often the privileged castes (or groups) use nefarious arguments to protect their interests.
  • Reservations once accepted in the constitutional framework are not a charity that is to be kept away from the ‘meritocracy’ of ‘private’ operations.
  • Like all other constitutional guarantees, one may feel the necessity to get ensured of equal opportunity in all spaces.
  • Giving preference and quotas for socially and educationally deprived sections in the private space is, therefore, in keeping with this fundamental tenet.
  • As the NCBC argues, with the number of jobs generated in the state sector shrinking steadily, for the promise of quotas in the Constitution to have any real meaning, it may be inevitable to extend it to the private sector.

How have the companies received this move?

  • Most companies have slammed the new local job quota law and asked the government to focus on training and skilling local youth.
  • Several experts have explained that Haryana is facing immense competition from other states that have now started attracting industrial investment.
  • Those states, however, are offering liberal policies and employment-incentive schemes. The new local job law could severely reduce new investments in Haryana.
  • Reservation affects productivity and industry competitiveness.

Way forward

The government is not an employment guaranteeing agency rather an authority which should create an environment through its policies which minimizes inequalities in income, status, facilities and opportunities.

  • India has already suffered a huge brain drain to the West because professionals do not get the same support here.
  • Our dependence on the government for everything and lack of individual self-reliance has promoted incompetent people and strengthened the bureaucracy, which has hurt India immensely in the long-run.
  • Recently, with rapid technological innovations taking over, the government has finally understood that they are not made for business and had to embrace private sector with open arms.
  • A better way to engage with the private sector would be to make the youth of a state employable with proper investments in education, health and skill development
  • States like Kerala have instituted enlightened policies of training migrant workers in the local language and also offering good education for their children.
  • In the medium to long term there is no option but for a big national focus on education, skilling, training and enhancement of human capital, which can get us out of this scarcity mindset of rationing jobs for locals.


  • The politics of identity and polarization on region/religious lines seems inadequate for the elections.
  • The philosophy and pragmatism of universal excellence through equality of opportunity for education and advancement across the nation is part of our founding faith and constitutional creed.
  • Clearly, this is not the appropriate domain of being “vocal for local”.
  • Although some reservations may still be necessary for the socio-political condition in India, reservation on the basis of domicile or residence within a State would be highly discriminatory.
  • It is more likely that such politically motivated steps would be overturned by the judiciary as has been done several times in the past.


Notify of
Inline Feedbacks
View all comments