Break India Up To Unify It

Context: There is a need to identify the economic self-interest in the recent job reservation bill of Haryana.

Background: The Haryana State Employment of Local Candidates Bill 2020 places restrictions on private enterprises in hiring employees earning less than Rs 50,000 a month from outside of Haryana.

• Job reservations to locals based on linguistic or geographic provenance have been formally or informally implemented in the past in Maharashtra, Karnataka and Andhra Pradesh.

Problems with states trying to safeguard their economic self-interest

• Against the principle of federalism: which constitutionally bestows the rights of freedom of ownership and employment anywhere in the country.
• Adverse impacts on India’s economic progress: For  E.g. Investors (especially foreign ones) will be discouraged as they fear complying with the laws would sacrifice economic efficiency.

Reasons that favour the states to focus on their economic self-interests:

• Socio-economic inequalities: which acts as both the push and pull factors of migration.
  • Per-capita incomes in Haryana, Karnataka, Maharashtra, Gujarat and Uttarakhand are 2-5 times those in Bihar, Uttar Pradesh (hugely populous) and Jharkhand.
  • This continues to impel residents of poor states to seek economic opportunities in other states, which sow seeds of populist policies in the economically better-off states.
• Cultural differences: For e.g. Catalonia’s separatist movement within Spain.
• Economic nativism ingrained in human behaviour.
• Perception of economically better-off states: They believe that they derive less benefit from a federal structure but perceive losing to the less-advantaged states because of cross-state migration. 

Way forward: Self-interest cannot be overcome through diktat or a federal structure. Therefore, India should resort to fragmentation to foster cohesion.

• Countering economic nativism with nationalism: Federalism is more likely to succeed when perception and reality are that the whole is greater than the sum of the parts — the states in the context of a federal nation.
• Make states smaller or impart greater decentralization: Smaller states then must recognize that their economies cannot be self-contained.
  • E.g. some states might be rich in natural resources but possess less skilled manpower or financial capital to exploit them; thus, they will seek the benefit from interdependence. 
  • Greater efficiency: As smaller states compete on offering superior investment climate, law and order, accountable bureaucracy and reliable utility services.
  • If India reorganizes into more smaller states, the invisible hand of competition will help every state to elevate their game.