Digital solutions to deepen and make transparent the land market are the way forward.
For India to become a manufacturing powerhouse the availability of land for industry is crucial. The government of Prime Minister Narendra Modi has adopted a pro-active and strategic approach to give manufacturing a big boost. Geopolitics has added momentum as countries look to de-risk, if not decouple, from China. It is India’s time to make the most of this opportunity. But can the Modi government, once bruised by an unsuccessful attempt to amend the land acquisition law in 2015, move the needle forward? The fact is that it is already doing so.
The way forward involves differentiating land acquisition from purchase of land. The former involves the government compulsorily acquiring land with due compensation. More than a decade has passed since the Singur controversy, but the underlying political economy of the government acquiring land, particularly agricultural land, for private industry remains unfavourable. Of course, the government needs to compulsorily acquire land for critical national infrastructure projects like highways and railways but that tends to be less contentious, though not always smooth.
What is not regulated by the land acquisition law is voluntary purchase and sale of land by private parties. But when the transaction involves large tracts of land, particularly agricultural land on the one hand and corporations on the other, it is not always easy to execute. One of the reasons that any land acquisition or land sale used to be contentious in India is because title deeds were either unclear or not available easily. If a person is unable to present a firm record of ownership, he or she may not feel confident of sale or adequate compensation. It also raises the transactions costs and risks for a potential buyer with a spectre of long litigation. Therefore, the market for land does not always work as it should. That is changing. The Digital India Land Records Modernisation Programme, a 2016 scheme sponsored 100% by the Union government, has led to digitization of records in most states. The records are also tagged with geospatial surveys which leave no ambiguity on land ownership.
Now, the Department of Land Resources, a relatively small and low-profile department under the Ministry of Rural Development, has announced progress in translating all digital land records into the 22 scheduled languages of India. Land records are usually maintained in the language of respective states. Easily available translations will deepen the market and make it more functional by building confidence in buyers from all parts of the country. It will also ensure a better price for the seller.
It is a myth perpetuated by vested interests and sundry activists that owners of agricultural land would not sell to industry. For most farmers in India agriculture is a subsistence activity. If adequately compensated, farmers would have more options. They could buy a bigger tract of land elsewhere with the proceeds of sale. They could invest in a different economic activity which generates greater return. They could also undertake an initial lumpsum expenditure on a house, vehicle and other consumer goods while saving the rest of the proceeds. At the time when farmers were organized to protest in Singur, farmers in the Sanand area of Gujarat earned a handsome return from the sale of their land.
If the market for land is functional, then sellers will get a price at which they would be willing to sell and the buyer willing to buy. There would be no role for the government or a land acquisition law. The compensation could be several times the circle rate/market price, more than what is prescribed under the Land Acquisition Act.
However, even after digitization and translation of land records, the land market may not work smoothly because of various middlemen and mafias. PM Modi’s government has done a terrific job of eliminating middlemen from the delivery of government benefits to the poor. The solution was found via the Jan Dhan-Aadhar-Mobile trinity which enabled direct transfer of money from the government to authenticated recipients’ bank accounts. India’s prowess in building a public digital infrastructure can be deployed to facilitate land transactions. A new idea was recently proposed by Vedanta Chairman Anil Agarwal in which a digital system can be developed under the nodal leadership of a public sector bank like SBI which would enable land buyers and sellers to transact digitally without needing to meet face to face or involving middlemen and vested interests. In such a system the buyer would offer a sum of payment and should the seller consent, the money gets transferred to him and the land title to the buyer digitally.
Two of the standout features of PM Modi’s government have been the effort to eliminate unnecessary middlemen from economic activity and adoption of digital technology to improve systems of government. Together, these have led to better functioning markets, greater efficiency, and reduced corruption/rent-seeking. Since land is a critical factor of production for manufacturing to become competitive, the government should take its efforts of digitization and deepening of markets to its logical conclusion.