Author: Khozem Merchant in Mumbai
Publication: The Financial Times
Date: June 4, 2004
Foreign employers in India fear
an affirmative action employment plan contained in the new government's
economic agenda could hit productivity and competitiveness.
P Chidambaram, India's finance minister,
was yesterday consulting leading manufacturers on government proposals
to reserve jobs for people from lower-caste or tribal classes.
Mr Chidambaram raised the issue
of job quotas in talks with businessmen and foreign investors as he sought
to calm markets unnerved by populist measures in the government's economic
agenda.
"The minister said nothing was fixed
[on reserved jobs]. But he sought ideas and it is clearly in the interests
of Indian business to engage as wide a section of the population as possible,"
said Mr Mukesh Ambani, chairman of Reliance, which employs more than 80,000
in telecommunications and petrochemicals.
India's so-called scheduled and
similar classes, the most economically disadvantaged sections of society,
form about half of the 1bn population.
Mahesh Vyas, chief executive of
the Centre for Monitoring Indian Economy, a leading think-tank, said: "In
the past, affirmative action has had a positive impact on backward classes.
"With the right education of foreign
investors, there is no reason why future FDI should not also be similarly
beneficial."
The development comes as the state
of Maharashtra in western India, one of the leading locations for domestic
and foreign direct investment, also moves to reserve jobs for lower castes.
Maharashtra's legislature is debating
a law that could mandate companies to employ up to half their staff from
"backward" castes. Mr V S Dhummal, the state's industries secretary, said
it was too early to comment on the implications as the law was in "discussion
stage".
Maharashtra hosts some of India's
largest engineering manufacturers such as Tata Motors and Bajaj Autos,
as well as foreign employers such as Bayer, the pharma group, and car manufacturer
Mercedes Benz.
The move by Maharashtra's legislators
has alarmed prospective employers.
This month, LG Electronics will
begin pilot production at a television plant employing 150 people near
Mumbai, the capital of Maharashtra. It already employs 2,400 at a consumer
goods factory near Delhi. "[We] would have no option but to comply - but
how can we compete this way?" asked an LG official.
One large European commercial vehicle
manufacturer, which has plans for a components plant near Mumbai that would
employ more than 1,000 people, said it was "extremely concerned" by moves
to determine employment by caste rather than merit.
