Biggest roadblock in India's growth

Mon, 22 Oct Pre-Open

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What is the biggest roadblock for India's development? Well, according to important state and business personalities land acquisition is a big hindrance. The colonial Land Acquisition Law of 1884 (amended in the 1900s) can no longer do its job because of widespread resistance. Thus a new bill was drafted in the parliament in 2011, almost 120 years after the original bill. In May 2012, the parliamentary standing committee report (PSCR) on Land Acquisition, Rehabilitation and Resettlement Bill (LARR) was made public.

But, this roadblock is still far from being cleared. According to various media reports there is still significant opposition within the Cabinet especially from the ministers for commerce, urban development, highway and surface transport, and civil aviation. There are a number of reasons for this dissent. As much as 50 m acres (around 6% of the total land in the country) of privately-owned land and common property resources (like forests) have been acquired or converted to non-agricultural use after independence. As many as 50 m people have been displaced or adversely affected because of it. However, since these numbers have not been carefully tracked, it could be a whole lot more. Most landowners were paid very little, and many were never paid. People who were dependant on the land lost their jobs and their livelihood. The groups most disproportionately affected were Adivasis and to some extent the Dalits. This system prevailed for a long time as the winners were more politically powerful than the marginalized losers.

The primary goal of the new bill was that the past injustices would not be repeated in the future. The new bill calls that two-thirds of landowners will have to agree before land can be acquired for private sector projects as well as joint private-public partnerships. The most troubling aspect of the LARR is its position on compensation. The solution chosen is overpayment. The bill appears to suggest that if all rural "market prices" are quadrupled and urban prices doubled, the landowners' reservation price (price below which they will not be willingly sell) will be reached. This is based on the fact that India only has two distinct markets. However, this is not the case - India has a large variety of land markets. Plus, on account of scarcity, land prices have multiplied over the past few years. Thus, the acquirer will be paying a premium on this account, and not because the land is more productive. Widespread poverty kept prices low for decades. But, with increased money supply, rising incomes and increased scarcity, people are willing to pay more. However, the arbitrary price factor that the LARR has prescribed has serious implications for many aspects of India's future development, especially for industrialisation and urbanisation. Big projects may not take off and project costs will reach unviable levels. Any central law on land should aim towards justice. Compensation for an acquisition we believe cannot be uniform and arbitrarily decided.