The Myth of Growth

In 1956, Charles Tiebout, an American economist devised an economic model (dubbed as ‘The Tiebout Model’) geared at advancing the ‘federal argument’ through a fiscal-financial fusion. The ‘Tiebout Model’ counseled that federal units/states within a country contest for migrant influx while offering an analogue to the private sector by rendering alternative baskets of public goods. Although 21st century India has trudged down this path of ‘competitive federalism’, things have started rushing leeward’s, lately. The recent populist wave of state legislation, slicing and reserving employment opportunities of the national civilian labor force head this puzzling anomaly. Initiated last year in the state assembly of Jharkhand these proposals have now engulfed states like Punjab and Haryana. Not surprisingly, these proposals stem from apprehensions about an ever-increasing internal migration that continues to be the norm and is exacerbated by large regional disparities, strong growth of industrial cities and allied satellite towns. 

Populism and Growth: Head-to-Head 

Consumed by this wave, in March, the Haryana government introduced ‘The Haryana State Employment of Local Candidates Act, 2020’ which is aimed at reserving 75% jobs in the private sector for locals. A state like Haryana which has owed much of its growth to industry hubs like Gurgaon, is projected to be a net migrant state at least till 2036 (Population projection, 2019).1 Gurgaon, a hub of private companies, is responsible for close to half of the Gross Value Added (GVA) of the service sector and has higher industrial potential than the other 21 districts of the state (Haryana Sub-Regional Plan, 2021).2 The 2011 Census pegs Gurgaon migrants to be over 4 lakhs in number due to the ever-increasing employment opportunities that the state has to offer.  Of the total population workforce of 1.5 crores in Haryana, (15-60 years of age) migrants constitute about 28 lakhs (Census GOI, 2011)3. However, in a bid to fulfill election promises and rebuild its image post-farmers protest, BJP-led Haryana government hastily passed the bill which is ultimately facing challenge in the Supreme Court.

Populist measures have grown via means of leaps and limits withinside the drawing close Punjab elections as well. A state which has seen a churning monetary deficit crisis over the years, alongside a declining budgetary allocation for the Education sector (11.6% OF GSDP in opposition to National Average of 15.8%) (Punjab Budget Analysis 2019-20, PRS, 2019) has fallen prey to freebies. Recently, BJP in its manifesto suggested a 50% reservation in private sector work for locals. Looking at the data, we can see that this policy is bound to fail for Punjab (Punjab NDA Manifesto, 2022).5 The history of Punjab’s growth focuses primarily on the agricultural sector. Moreover, agricultural contributions to GSDP decreased from 31.13% to 27.34% between 2004-05 and 2011-12 (NSDC Punjab Skill Gap Report, 2017). 6

Population projections predict that Punjab will be the second-largest immigrant state after Haryana by 2036 (Population projection, 2019).7 Further, reports from National Skill Development Corporation (NSDC) confirm that there is a huge skill gap in Punjab, with the highest being in semi-skilled and skilled sectors (NSDC Punjab Skill Gap Report, 2017).8 Therefore, a policy aimed at reserving jobs for locals will plummet opportunities for diversification and repel any possible investments by industry.

What Courts Have Said

Historic evidence suggests that the law does not have a legal standing either. In Dr Pradeep Jain Vs Union of India (UOI), the Supreme Court stated that domicile-based reservation deprives an individual of his fundamental right.  Further, the Court in Charu Khurana Vs UOI and Others clearly rendered reservations based on residence for the purposes of employment, unconstitutional. Several states, like Madhya Pradesh and Maharashtra, which have introduced similar legislation are facing lawsuits.

For the youth seeking employment, there is a high level of skill-set deficiency in Haryana as the supply-demand gap for skilled labor increased by 6 times between 2012-22 (NSDC Punjab Skill Gap Report, 2017).9 Hence, even if the law secures them employment in private firms, they may not be able to grow in the highly competitive work environment. Further, the revision of the wage ceiling for reservation to Rs 30,000 by the law will have a grave impact on the State’s manufacturing sector, which employs a large number of semi-skilled workers with wages falling under the ceiling. In a probable scenario the fate of Punjab’s growth would turn downhill if a law similar to Haryana is introduced. 

Way Forward

These kinds of policy measures are bound to result in a myopic view of economic growth. States like Haryana, Punjab can reap the fruits of the migrant economy by undertaking skill enhancement for youth, which would promote competition in the hiring sector. States like Punjab can diversify their economic sector by building attractiveness through mega-food parks, food processing industries. There is a unique opportunity for the government to fulfill its objective of providing jobs to the local youth by incentivising the private sector to hire locally, instead of mandating it. Governments must consider the long-term positive impact of skill development for its domicile, while also balancing the short-term needs of the economy, currently being fulfilled by the presence of migrants. Building cohabitation ecosystems in sync with India’s federal spirit, and increasing the competency and skills of the youth will help states like Punjab and Haryana lead by example in the race to growth.


  1. Population projection 2019
  7. Population projection 2019

The views expressed in this article are the author's own.

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