Land and the problem of inequity

In my last column "Building back better" (Business standard, January 11), I argued that the binding constraint to India's development transformation was the unequalising allocation of land, capital and human resources.

In this column and the next, I will focus on the land question. The utilisation of land in India has always been vexatious. The situation is getting steadily worse.

By 2050, India will be the most land-scarce major economy in the world. This problem has been recognised, especially in a brilliant exposition in 2014 in the columns of this newspaper (Devesh Kapur, TV Somanathan & Arvind Subramanian, Business Standard, July 20 and 21, 2014). However, that approach looked at land as a market commodity and proposed technocratic and institutional solutions to fixing land markets. This does not make explicit the unequalising deployment of land in its private, public, and common allocations.

The land misallocation problem has three major socio-political drivers: 1. Returns from land ownership in India derive not from its use but from the scarcity rents secured by deployment for unequalising development.

Structural change involves considerable alterations in the geography and topography of land use.

These should result in greater and more inclusive benefits to the population. But if the changes in land use are cornered by a minority who benefit solely from their legacy land ownership, then this further concentrates wealth and inequality, and distracts from good capitalism. The focus is on the rents from scarcity value, rather than on profits from deployment in the most productive activities.