Imagine this. You’re an IT expert applying for a job in Bengaluru. However, instead of vetting your resume and testing your knowledge of programming languages, the company wants to know whether you can read, write and speak the state’s regional language. This example could be the reality if the Karnataka State Employment of Local Candidates in the Industries, Factories and Other Establishments Bill, 2024, becomes a law.

Last week, the Congress government in Karnataka tabled the bill in the state assembly, fulfilling a key electoral promise. The proposed bill seeks to reserve 50% of management-level jobs and 75% of non-management roles for locals in the private sector.

The introduction of the bill resulted in a lot of outrage on social media. After concerns were raised by various stakeholders, the bill has now been put on hold.

But the possibility that it could be enacted has raised several concerns. For starters, who will qualify for jobs in the state?

Who gets reservation? Those born and brought up in Karnataka certainly fulfill the criteria. Besides, those who may not be from the state but have been living there for at least 15 years and can read, write and speak Kannada also fall under the sanctioned category.

While the bill promises to strengthen employment for locals, it could pose significant challenges for the state’s migrant population.

“We should not underestimate migrants,” says S. Irudaya Rajan, chairman of the International Institute of Migration and Development. “They are like warriors. They are fighting poverty and unemployment. If they don’t find a city suitable for them and their family, they will move. I think for a state’s own interest, the government has to encourage migration of people.”

By intending to curb migration, the bill particularly violates Article 14 (right to equality) and Article 16(2) (equality of opportunity in employment) of the Indian Constitution.

Taking the argument further, Bhagwati Tiwari, an employment and corporate advisory lawyer based in Delhi, lists three fundamental issues with the bill:

The state cannot discriminate against Indian citizens based on their place of birth and residence.
No state can infringe upon an individual's fundamental right to free trade, commerce and intercourse throughout the territory of India as well as to move freely within India.
The state cannot interfere with the internal business affairs of private employers by dictating whom they should or should not employ.

If the bill becomes law, the worst hit will be the state’s capital Bengaluru, often dubbed as India’s Silicon Valley.

Threat to business: Bengauru is home to 1,100 startups and 30% of total global capability centres. The city “contributes 43.86% to Karnataka's economy, with IT alone accounting for 25% of the state's GDP. The bill could disrupt the diverse talent pool, potentially causing tech companies and startups to relocate, hampering innovation and growth”, says Rahul Kumar, a governance consultant with over a decade’s experience.

This could have repercussions for Karnataka. “It could jeopardize the state's plan to become a trillion-dollar economy in the next five years and deter new investments by creating a less business-friendly perception,” says Kumar.

And this disruption won’t just be limited to tech companies. The city’s construction, real estate, manufacturing, service and informal sectors are also likely to be affected.

“In Bengaluru, over 80% of the construction workers are migrants. This bill could lead to severe labour shortages, slowing infrastructure development and impacting the real estate market, currently among India's top three,” he adds

Also, if migrants decide to leave in case there aren’t enough jobs, Bengaluru’s rental market—homes, appliances, startups that offer subscription-based services—and the gig economy could be severely hit. This means that many businesses could see their revenues dwindle once volumes contract. This could, in turn, hurt investments.

We have seen this in the case of Haryana. The state introduced a job reservation bill in 2020. Although it was later struck down by the court, the state saw its share of new investment projects in the country dip to a six-year low of 1.06% in the 2022-23 fiscal. In 2021-22, total investments in the state dropped by 30%. A similar situation could play out in Karnataka.

There are other challenges too. “The bill might create an artificial demand for local talent, potentially leading to a mismatch between skills and job requirements,” says Kumar, adding that Bengaluru's diversity is crucial for its status as a knowledge hub and restricting this could slow R&D activities and innovation.

What next? Tiwari, the lawyer quoted above, says the bill is likely to be struck down by the judiciary, meeting the same fate as its predecessors. Before Karnataka, Andhra Pradesh in 2019, Haryana in 2020 and Jharkhand in 2023 had tried to implement reservation for locals in private jobs.

“The medium is the message, and in this case, the very proposal of such legislation speaks volumes. Given the precedents… it is implausible that the Karnataka government is unaware of the deep-rooted unconstitutionality plaguing the proposed bill. At this stage, the move appears more likely to be a political gesture aimed at demonstrating concern for local interests,” says Tiwari.

The National Association of Software and Service Companies (Nasscom) has also urged the government to scrap the bill as it risks the state losing its competitive advantage, particularly in attracting multinational companies, global capability centres and startups.

A recent report by Deloitte highlighted several reasons for Kartanata being a powerhouse of skilled workforce: tax incentives for investors, favourable working conditions for employees and good infrastructure. But proposals like the latest bill could dull the state’s gleaming success.

Cover illustration by Devyani M/ The Morning Context