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Domicile reservation in the private sector

2023 MAY 9

Mains   > Society   >   Regionalism   >   Regionalism


  • Haryana has witnessed a decline in fresh investment projects. This decline coincides with its enactment of a new law in early 2022 that reserved 75% of private sector jobs with monthly salaries up to Rs. 30,000 for locals. The law is in abeyance after being challenged judicially, but the suspense over its implementation remains a worry for investors.


  • Domicile reservation assures that jobs that are created in a state will be first offered to only those people who belong to that state.
  • Usually used as a populist agenda, this trend has picked up pace in recent times. Like Haryana, many other states have also announced or taken measures to provide reservation in employment for local residents.


  • The Constitution prohibits any discrimination based on grounds of religion, race, caste, sex, or place of birth.
  • However, the state may provide for the advancement of certain sections of the society through reservation in education or employment.
  • This reservation may be on the basis of domicile (residence), or backwardness.  For example:
    • Under Article 16(3), Parliament can prescribe residence as a condition for certain employment or appointment in a state or union territory or local authority.
    • Under Article 15(4), the State may make provisions for the advancement of socially and educationally backward class of citizens or Scheduled Castes and Scheduled Tribes.
    • Under Article 16(4), the State can provide for reservation of appointments or posts in favour of any backward class that is not adequately represented in the state services.


  • Some states have been using several loopholes in the laws to provide reservation for locals in employment:
    • Language as a criterion: Discrimination on the basis of language is not prohibited by the constitution. Using this, States have gone around the constitutional mandate and prescribe knowledge of local language as a criterion for selection. For example, states including Maharashtra, West Bengal and Tamil Nadu require a language test.
    • Special protections under Article 371: Some states have special protections under Article 371. For eg: Andhra Pradesh under Section 371(d) has powers to have “direct recruitment of local cadre” in specified areas.
    • Exception for Private employment: Article 16 talks about “public employment”. Hence states have created legislations that pertains only to “private sector employment”.


  • Rising unemployment levels:
    • Many of the states that have implemented such legislations are facing a rising trend in unemployment levels. Reservations in private employment can help curb this trend.
  • Similar provisions in education sector:
    • Similar arguments were made when requiring private schools to comply with the Right to Education Act, which the Supreme Court upheld.
  • International examples:
    • Developed countries have adopted some form of policies and compensation systems to benefit the local population.
    • For example: The Employment Equity Act in Canada protects minority groups, especially aboriginals from discrimination in federally regulated industries, even in the private sector.


  • Questions on Constitutionality:
    • Reservation in private institutions may violate their right to carry on an occupation or business.
    • A state law providing for reservation based on domicile may not be constitutional, since the constitution mandates that only the Parliament has such powers.
    • 75% reservation in employment may violate the guidelines laid down by the Supreme Court in the past. Eg: In the Indra Sawhney case, the Court held that total reserved quota should not exceed 50% except in some extraordinary situations and that the backwardness envisaged is mainly social backwardness.
  • Balkanisation of labour market:
    • Such policies can promote regionalisation trends in the country, which can affect the unity and integrity of the nation.
  • Promotes informalisation:
    • Placing constraints on businesses and additional compliance burden creates adverse effect on businesses within the country.
    • This further discourages employers to formalize their activities.
  • Practical difficulty:
    • According to the Periodic Labour Force Survey (PLFS) 2017-18, merely 1.8% of the population received formal training on technical aspects and employment-ready skills.
    • Hence, there is a clear lack of workforce necessary to meet the locals first policy.
  • Reduces competitiveness:
    • In many states, adequate skilled domestic labour may not be available and it restricts the pool of candidates from which they can hire which may hurt their efficiency and competitiveness.
  • Loss of investment:
    • Reduction in ease of doing business and shortage of manpower will make India a less attractive investment destination.
    • Such policies can eventually lead to flight of capital from India to countries like Bangladesh and Vietnam. 
  • State abdicating its responsibility:
    • Extending reservations to private sector provides a way for governments to bypass their role of generating sufficient livelihood opportunities and equality of opportunity for people.


  • Such reservations are only short-term remedies to unemployment in the country. Governments need to undertake efforts to enhance skill levels and generate employment in the economy. 
  • Government can come up with incentives to companies which invest in local population. Such incentives could be in the form of capital for better skill development, lower electricity charges, better infrastructure facilities etc.
  • Another way to generate employment is to encourage entrepreneurship in the country. For this, exiting measures like Start up India mission needs to be aggressively promoted.


Q. In recent times, several states have taken measures to provide reservation in employment for local residents. In this regard, critically examine the policy of locals first?