Land Policies and Land Reforms in India: Progress and Implications for the Future

Perhaps not surprisingly, given the serious and harmful long term consequences of the land ownership inequality established and maintained under colonial rule, land policy in India has been heavily focused on state-led land redistribution. We argue that greater reliance on markets can help achieve original land reform goals. Data from the 1982/99 ARIS/REDS are used to demonstrate that (i) the productivityimpact of rental markets is very positive; (ii) they transfer land to the poor on a large scale; and (iii) statelevel rental restrictions have a large negative impact on supply of land for rental. These data also show that sales markets have been much less biased against the poor than often argued. To prevent an unraveling of the gains from land reforms, provide the basis for well functioning land markets, and avoid that insecure property rights develop into an obstacle to future growth and poverty reduction, more attention to land administration is needed. A review of different states’ experience in computerizing their land records and automating registries highlights differential progress (including scope for leapfrogging by latecomers), helps identify the elements of a comprehensive system, and points towards ways of addressing them in a way building on India’s comparative advantage. The paper concludes by drawing out implications for policy and research. 1. Motivation and background Land reforms have for a long time constituted a central element of India’s policy for rural poverty reduction and growth. However, given that most of the relevant policies were put in place long time ago and that high levels of economic growth continue to profoundly transform India’s economic landscape but also create new demands for land policy, questions on the continued adequacy of such policies and a potential need to refocus overall policy and implementation have emerged. A key justification for India’s land reform policies was that (i) markets on their own will not accomplish the redistribution of land to the poor and marginalized that is necessary to overcome the legacy of deprivation, increase productivity, and move towards greater equality of opportunity and that (ii) bureaucratic action can accomplish this goal more effectively and at a lower cost. While this is likely to have been the case true when such measures had been conceived, the pace of land reform implementation has slowed considerably while economic growth and government policies to help backward regions advance have helped to attenuate many of the market imperfections that provided the justification for government intervention. Despite restrictions on their functioning in many states, markets for rental of land have picked up considerably. However, empirical evidence on the extent to which they contribute to increased productivity and the impact of policies on their functioning remains limited. Three observations suggest that more detailed exploration of this issue may be of relevance. First, with about 15 million farm households participating in land rental even according to existing data, the number of households who access land through rental markets every year exceeds that of those who obtained land through land reforms, defined as either tenancy reform or redistribution of ceiling surplus land, throughout India’s entire post-independence period. Second, economic development is both a cause and a consequence of increased demand for land transactions. However, in marked contrast to China, where,