The Karnataka government on July 15, tabled the Karnataka State Employment of Local Candidates in the Industries, Factories and Other Establishments Bill, 2024, in state assembly.
The Bill, which mandated factory or other establishments to appoint 50 per cent of local candidates in management categories and 70 per cent in non-management categories, has been temporarily put on hold.
Talent company Randstad India managing director and CEO Viswanath PS told PTI that employment should be based on ‘skills, not on domicile’.
“At a time when companies are already facing a significant skill crunch, this move will further tighten the talent pipeline. The government’s role is to enable ease of doing business. However, this policy might hamper the productivity and efficiency of companies, both big and small, operating in Karnataka,” he added.
If implemented, the state will also risk losing its competitive advantage, particularly in attracting multinational corporations (MNCs), Global Capability Centres (GCCs), and startups, he said. Echoing a similar view, TeamLease Degree Apprenticeship CEO AR Ramesh said the current need is to emphasize skill development to address the gap between available opportunities and the requisite skills for employability. “Although the state’s growth in manufacturing, services, and related industries has resulted in significant migration, the focus should be on enhancing skills and productivity rather than erecting artificial barriers.
As the epicenter of India’s IT revolution, Karnataka risks unsettling national and international tech giants that rely on a skilled workforce, he said.
The Bill drew criticism from the industry, with NASSCOM cautioning that companies would move out of Karnataka. Industry veterans have also objected to the proposed quota, calling it ‘fascist,’ and ‘short-sighted.’
TeamLease Services Senior VP and Business Head Balasubramanian A said, “a similar proposal from the Haryana government in 2021 never saw the light of the day – as it was shot down by the Punjab and Haryana High Court for being unconstitutional as it violates both Article 14 – which guarantees equality of all citizens, and Article 19 – which grants every citizen the right to reside and work in any part of the country.”
There just aren’t enough people in Karnataka to cater to entry level jobs across e-commerce, logistics, manufacturing among others, said Balasubramanian.
He said, many MNCs have been setting up GCCs in India lately and the Production-Linked Incentive (PLI) scheme has attracted several manufacturers to produce locally and Karnataka is already a big beneficiary and it could gain even more prominence in the future.
“If these firms see such laws come into force and feel that it’s going to now be a norm across other states too, they may just move out of the country. Thus, it could result in a net loss for India, not just for Karnataka,” he added.
According to CIEL HR Services MD and CEO Aditya Narayan Mishra, implementing such legislation would pose significant challenges for businesses of all sizes, particularly in talent acquisition and compliance costs.
Companies would need to track employees’ domicile status for recruitment and internal mobility, increasing operational costs and complexity, which might prompt businesses to relocate to more operationally favorable states.