Pricing and allocation of resources with finite supplies has been a core economic problem. The disputes surrounding the rules to buy land for building factories, roads and other infrastructure are emblematic of this. The arguments are strong and emotive from both sides of the fence.
At a meeting with the Centre on Wednesday, several chief ministers, mostly from BJP-ruled states, are believed to have made a strong pitch for easing conditions that are seen as restrictive by industry. Some states have argued in favour of a decentralised approach to allow the local governments to frame their own laws to suit region-specific parameters. In the absence of an environment of complete unanimity, this can be the second-best solution that the government can look to adopt.
Unlike mature economies, in India land is more than a resource and the average farm holding is about two acres. The willingness of the part of anyone to dispose of assets is guided by two foundational principles: one, the present value of the returns will outweigh the income earned from the asset, and two, the asset sale should trigger an upward mobility of sorts. Most of the fear about the land acquisition law appears to be driven by the perception that it could bring in ‘land-grabbing’, and farmers will get a raw deal. The central law, enacted in 2013, had made it compulsory for people buying agricultural land for non-farm purposes to secure the consent of 70% of the affected people in the case of PPP projects and from 80% of the landowners for private projects. It also made a ‘social impact assessment’ mandatory. Industry leaders have, however, argued that such constricting rules have delayed many projects that can create jobs.
States willing to walk the talk through their own land buying rules can be a good beginning to make. It will also fit perfectly into Prime Minister Narendra Modi’s narrative on cooperative federalism, which advocates involving states in the Centre’s decision-making. States’ involvement is critical, particularly for a country like India, where some pockets compare with the world’s richest nations, while many others can match up only to the poorest countries of sub-Saharan Africa. The involvement of states will help policymakers in New Delhi uncover geographic slivers of opportunity -- states, metropolitan cities and their hinterlands. Too much of political capital has already been expended on defining a watertight land policy. Allowing states to take the lead could be a gambit worth taking.