Base and superstructure: Ideological constraints affecting India’s land markets

As a scarce resource, land in India has often been, and will continue to be a source of heightened contestation. This contestation has taken place on the base of the legal framework that regulates land markets. This legal framework enables the state to exercise extensive control over the market. Over the decades, state power has been used extensively in an attempt to restructure socio-economic relations in society.

This legal framework has been successful in fomenting political mobilisation, it has not increased the efficiency of the market in any meaningful manner. If the underlying premises remain unchanged, this feature of our land markets – intensive political contestation without meaningful efficiency or equity gains – is likely to continue. This is likely to become increasingly contentious given the increased dynamism of the Indian economy – rapid urbanisation, diversification of the rural economy, and industrialisation.

During colonial rule control over land was not subject to democratic power. Since 1947, the use and control over land has been under democratic control. However, in these years, the issue of control over land was a huge source of conflict. Radical laws were passed to redistribute agricultural land and to ensure equitable rights for the cultivating class. However, their success was limited. Their implementation gave rise to a spate of litigation, and also led to extreme violence.

For all the frenzied activity over the equitable distribution of agricultural land, and planned urbanisation, the outcomes have been poor. Both agricultural and urban land in India are frightfully expensive. Getting land to set up industry often becomes a political nightmare. The rural economy that is intrinsically tied to land remains woefully stagnant. Migrants to urban areas are unable to afford decent housing, sanitation and safety.

An important dimension of this field is that these outcomes are rooted in the ideological basis on which Indian markets for land rest on. This ideological framework is broadly common across different kinds of land markets in India – rural, urban, industrial. And this framework has developed over the years in a manner that has rigged the land market against those who depend on it the most.

India’s regulatory framework in the land market today resembles that of other sectors like the financial markets and the telecom sector before they were liberalised. Market liberalisation did two things – it limited the scope of government regulation, and reoriented regulation to solving problems that privately-dominated financial and telecom sectors faced. This led to the growth of both these markets, and generated unprecedented benefits for consumers and prosperity for investors.

Similarly, the regulation of rights in land has a strong connection with the size, dynamism and growth of India’s land market. Laws and regulations that impair such rights constrain the land market.

State regulation of agricultural and rural land

Today, the state regulates almost all parts of the agricultural land market extensively. It determines what is agricultural land, and what is not. It determines who can own agricultural land. Many states prohibit non-agriculturalists from buying agricultural land. Others prohibit non-residents of a state from buying agricultural land within the state.

It also places restrictions on other kinds of transfers of agricultural land. For example, land given to the dependents of deceased military personnel cannot be transferred in many states. Through land-ceiling legislation, it lays down how much agricultural land one can own based on its estimation of what constitutes a sufficient amount of land.

Many states in India do not recognise tenancies and prohibit subletting of agricultural land. Others place restrictions on the contracts tenants and owners of agricultural land can enter into. Other regulations place restrictions on leasing and subleasing of agricultural land.

State regulation of towns and cities

Just like agricultural land, state regulation of urban land markets is extensive. In urban areas, the state not only decided who will own how much, and for what purpose, its role starts at the very inception – of deciding when a town should be called a “town” and a city a “city”. While almost all countries adopt some similar framework to regulate land-use, the framework adopted by India has been criticised by many as being too stringent, and one that effectively slows down the process of providing urban facilities like sanitation to rapidly growing new towns.

Conclusion

This restrictive regulatory framework has failed to provide dividends. Property in major Indian cities is more expensive relative to most other major cities in the world. Rural incomes have remained stagnant and required substantial government support. It is therefore time to revisit this regulatory framework (a) by understanding why this framework has failed, and (b) what can be done to reform this framework.

The author is researcher at Carnegie India. This paper was presented at the APU-NIPFP workshop Strengthening the Republic#1, January 11, 2020.