By Shritama Bose
MUMBAI- 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 percent 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 percent of the country’s global capability centers including Goldman Sachs’ biggest workforce outside New York. The presence of tech giants from Apple to Google-owner Alphabet 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 labor laws last year to smooth iPhone production after Apple and its supplier Foxconn 2317.TWlobbied 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 percent 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 neighboring 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 defense against politicians’ populist instincts.