The International Growth Centre debates the impact of India’s small landholdings on agricultural productivity and profitability

Khatun, Mazida

LSE Research Online

2012-7-31Land acquisition: Balancing agricultural growth andindustryblogs.lse.ac.uk /southasia/2012/07/31/balance-agricultural-growth-and-industry/The International Growth Centre debates the impact of India’s small landholdings on agriculturalproductivity and profitability.The International Growth Centre’s (IGC) inaugural South Asia Growth Conference, which was held in Dhaka on July15-16, began with a reflection on the challenges that the region faces in maintaining its current growth trajectory.Many obstacles to sustainable growth are shared by India, Pakistan and Bangladesh, with poverty, regionalintegration and environmental degradation at the forefront of many South Asian policymakers’ minds. For India,however, questions about land acquisition policies dominate discussions on how to balance agricultural growth withefforts to industrialise the rural landscape.Land acquisition has long been an issue for a hungry yetgrowth-oriented India. In 2006, West Bengal’s Left Frontgovernment, under pressure to expand non-agriculturalemployment and promote private sector investment, permittedTata Motors to manufacture its Nano car in Singur. Butwidespread protests by displaced farmers, activists andopposition parties against West Bengal’s forcible landacquisition strategy for the project resulted in Tata’s decision torelocate its factory to Gujarat in 2008. This example shows thatIndia, like many developing countries with extensive rural areas,faces a dilemma between industrialising and protecting itsagricultural sector and those it employs.The main debate revolves around whether small or large farms are better suited to deliver this balance. Nowhere inthe world are farms as small as they are in India, with most averaging just one acre in size. Speaking at the IGCSouth Asia Growth Conference, Brown University’s Andrew Foster explained that labour use is one of the key thingsthat needs to be considered in terms of yield and profit: small farms utilise almost five times as much labour per acrethan large farms, which obviously has impacts on productivity and profitability.It also doesn’t help that land transactions in India are extraordinarily rare—only 4.6 per cent of cultivated plots arerented, and of those 72 per cent are from parents or siblings. In short, India’s land markets are not working in a waythat would increase productivity.Further, Dilip Mookherjee, IGC’s Lead Academic for the India Central programme, pointed out that although 70 percent of Indians live in rural areas, many are not engaged in agricultural work. Still, many landowners remainreluctant to sell their small landholdings as they embody a personal as well as financial value. Mookherjee arguedthat market values treat land as a financial asset alone and understate personal valuations of land, as a result ofwhich the demand for land remains unfulfilled, despite heavy-handed tactics by some state governments.Mookherjee recommended that compensation for land purchases in West Bengal should exceed market valuationsto reflect personal valuations and also suggested that authorities should simultaneously seek to moderate excessiveland acquisition on grounds of efficiency, equity and political sustainability.Ultimately, state governments will also have to address the fact that those households whose land had beenacquired for alternative development such as factory construction became signficantly worse off, with incomes 33per cent lower than those whose plots had not been acquired.1/2Mazida Khatun is an IGC Communications Officer. Copyright © 2016 London School of Economics2/2

Land acquisition: balancing agricultural growth and industry

Abstract

Similar works

Full text

Available Versions

LSE Research Online