Tuesday, 12 July 2011

Land Reforms in India

One of the most ticklish questions in Indian economy has been the nature and relevance of land reforms. Comprehensive land reforms were among the first priorities of the Government of India immediately after Independence. For this the manifold imbalances of the colonial legacy of two centuries had to be dismantled, and a new beginning made. It was a semi-feudal system that was inherited from British rule. A handful of intermediaries rack-rented a large mass of hapless tenantry. A widespread system of subletting, often several rungs deep, worsened the situation by reducing the holdings to uneconomic proportions.

With the twin objectives of achieving social equity and ensuring economic growth, the land reforms programme was built around three major issues:
1.      Abolition of intermediaries.
2.      Settlement and regulation of tenancy.
3.      Regulation of size of holdings.

The central thesis behind the abolition of intermediaries, underlined by the first as well as the Second Five Year Plan, was that owners themselves should operate and manage farm business, and so the tenant-landlord nexus should be put to an end. The intermediary’s privileges were conceived as having an adverse impact on agricultural productivity as well as denying the tiller of the soil his rightful place in the economy. Tenancy reforms were launched to confirm the rights of occupancy by tenants, regulate rents on leased land and to secure their possession of tenanted land. It was argued, especially in the context of the spread of modern technology, that the tenants lacking a security of tenure and paying excessive rents suffer a relative decline in inputs compared to the owners. To this end the following recommendations were made by the Chief Ministers’ Conference in 1967:
1.      The rate of interest should not be more, preferably less, than 1/4 or 1/5 of the gross produce.
2.      Records of tenancy should be prepared and maintained.
3.      Tenants in cultivating position of land should be given complete security of tenancy by: i) staying all evictions; ii) suspending rights of resumption where such rights had been given to landowners; and iii) regulating voluntary surrenders in such a way landowners do not get an advantage by persuading tenants to surrender their tenancy.

The third major land reform plank was regulating the size of land holdings through ceiling as well as consolidation to correct the extremely skewed distribution of agricultural land. It was designed to (i) to meet land hunger of working cultivators, (ii) to reduce the disparities in agricultural income, ownership, and use of land, and (iii) to increase rural employment in the sector. At the same time, consolidation of holdings was also advocated to group together the numerous tiny and scattered holdings of poor cultivators in order to form bigger tracts, susceptible to more efficient management. Cooperative farming on these would increase productivity and employment through economies of scale. The large, economical units of consolidated land, it was opined, would mitigate the problem of poor yield and enhance productivity through economies of scale and also increase employment.

As the land reforms reach an impasse, a series of considerations have raised serious doubts about their continuing relevance as to whether they are really the best way for achieving growth with general well-being and whether they are in harmony with the ongoing liberalisation of Indian economy. Ultimately, the success or even the initiative for such policy measures would depend on the extent to which our decision-makers believe them to be compatible with the politics of competitive populism.

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