Modi’s development key: agricultural land rights liberalisation

Narendra Modi has stated that growth, controlling food-price inflation, improving farmers’ incomes and developing infrastructure are top priorities. Agricultural Land currently makes up ~60% of India’s total land area. Liberalising agricultural land usage laws has the immense potential to accomplish these, amongst other things: 1. Liberalising agricultural land usage rights increases both use and trade value for investors, developers etc. – farmers’ and landowners’ wealth will increase.

2. Enables farmers and landowners to develop their land and diversify their income and, since they know what parts of the land are relatively unproductive or infertile, they will be able to diversify their income (tourism, hospitality, factories etc.). At the moment, a lot of land remains uncultivated because agriculture is not financially feasible but undeveloped because of land usage policy.

3. Developing rural and semi-rural transport infrastructure becomes legally possible and, therefore, private entities will be more likely to invest in its development.

4. Further connecting the Indian hinterland via the aforementioned liberalisation of the private development of rural transport infrastructure.

5. Combating food-price inflation. Food-price inflation in India is not due to a shortage of food per se but, rather, the fact that the transport, storage and maintenance infrastructure is so poor or even non-existent in places. This means that close to 1/3 of the food rots or spoils before it even reaches the market. If it becomes legally feasible for interested parties to build and improve roads, storage facilities and so on, then this will efficiently preserve stock and connect the source of produce to the markets; food-price inflation will naturally decline via this supply-side reform.

6. Reducing farmers’ suicides and debt. Since farmers will have alternative sources of income, increased wealth and also increased income from actually being able to transport their food to market, more farmers will be able to service their debt and are less likely to commit suicide.

7. Economic counter-terrorism against Maoists. Maoists are scattered across rural and semi-rural parts of India and are particularly concentrated in areas that are rich in natural resources and where there is high unemployment. The aforementioned points in 3 and 4 will make it easier to combat them and alleviate the economic pressures in that lead to the violent backlashes.

8. Diversified employment opportunities. Opportunities for diversifying land use and earning through alternative sources of income means there is a chance to have jobs that require different skills and education in rural areas.

9. Easing pressure on urban India to accommodate migrant workers. From 7, there will be less incentive for younger migrants of rural origin to travel to cities for jobs (or at least the rate at which migration increases may not increase as much).

10. Increased private incentive to educate. 7 implies that there will be a greater need for certain skills and education to prepare workers for different types of employment.