Economic data released by the Indian government on Aug 31 shows the country’s GDP growth rate in second quarter of the year is 7%, lower than the number of last quarter which is 7.5%. Although the growth rate gives light of hope for emerging markets, India’s economic reform is still facing great obstacles. Starting from Sep 1st, the draft of the amendment of India’s Land Law was announced ineffective after going through a 5-month tumultuous discussion. Last Sunday, Modi’s government announced: “After all the efforts, the draft fails to win support from the opposite party as well as the general peasants who are worried about the rumors and afraid that their lands may be deprived. Regarding the current situation, it’s not necessary to continue promoting the draft.” Reuters commented that this was the first time that Modi admitted the failure of land reform in the country which would inevitably hinder the transition process of India’s economic industrialization.
Sell land for a better living?
The new government which came into power last year had amended the 2003 version of Land Law to make it more adapted to the need of Modi’s economic reform. On this April, the lower house of India’s parliament passed the draft of the amendment of the Land Law, which stipulated that the government could purchase “public land” for the construction of industrial corridor, highway and railway network without the permission of peasants, and the government would give every peasant’s household a job quota in the factory. Besides, similar land acquisition projects were allowed to skip tedious social and environmental assessment procedures to speed up the progress of the projects.
Opposite parties in India lashed out at the new version of Land Law as soon as it came out. They considered it a coercive draft to acquire agricultural land which would inevitably deprive peasants of their basic means of production. Reporter of Global Times found that most peasants in villages in Haryana, a state near New Delhi, held opposite view toward the new Land Law. They considered that acquisition shouldn’t happen without discussions. Laldanny is an officer in charge of land trade in the Asada village committee. He has been in the position for 20 years. Laldanny told PD: “the land trade volume was big in previous years but it has been declining in rencent few years. Many peasants realized that the earnings they got from selling the land couldn’t help them live a better life in cities because they may not find good jobs there.”
From the perspective of Laldanny, for most local villagers, income is the only problem because you still own the land, but if you don’t have any land, you are facing poverty. However, some peasants did benefit from the industrial transition process. They got jobs in factories and bought new land with compensation.
Hinder India’s industrial transition
Opposite parties representing by the Indian National Congress welcomed Modi government’s “backward”, regarding it “a success of peasants” and that Modi’s “industry-friendly” new land policy should not based on the deprival of peasants’ benefits. Indian media who have been following the issue considered the result “within expectation” and that Modi’s “industry-friendly” reform measures would inevitably encounter obstacles in India’s traditional agricultural society. Meanwhile, gaining support from the large number of peasants was the premise of a stable government.
Laldanny said, according to the current Land Law, “Acquiring land for private projects needs to be approved by 80% of families concerned in the deal. For public-private joint projects, you need the approval of over 70% of the land owners.” It is not easy for villagers to reach collective agreement.
Land reform suffered a setback, so is logistics
For foreign-owned enterprises who want to invest and build companies in India, the land reform setback will, to some extent, have impact on the investment efficiency. But generally, most of the enterprises are not expecting the problem to be solved overnight. Reporter of GT found during interviews with Chinese company owners in many parts of India that different companies take different measures to solve the land problem. Some bought land from the local government; some made use of “semi-finished” development zone; some went directly to Indian markets by means of buying out companies, amalgamating or reorganizing. Since India owns large land resources and the government is not facing a shortage of industrial land, the most important thing for foreign-owned enterprises to invest in India is whether the products are connected to the market. The land issue comes next.
And another thing is the cost of logistics. India is backward in its infrastructure and the road conditions are bad. Besides, the railway and highway network runs in low efficiency. To improve and construct national transportation network, it is a must to acquire agricultural land in different states. This is also the original intention of the Indian government to launch the new Land Law. But now the land reform suffered a setback, which would certainly be considered as a major economic loss of India’s economic reform.