Mamata's land policy will not work

Personally, I have no complaints about the current government, but then I had very few complaints about the previous government as well.

Personal experiences aside, I would like to dwell on the land issue and the government’s attitude towards industrialisation. It is clear to everybody that industrialisation is necessary and unless we address it in a very big way, it’s not going to solve our unemployment problem. The government understands this and has even amended the Land Ceiling Act. But will it really solve the problem?

From a theoretical perspective, the Land Acquisition Act (Singur case) is in court and the government’s position is that it wants to return land to the unwilling farmers. Assuming that the court gives a favourable judgment, even though it can drag on to the Supreme Court, the message to the industry from the government will be this: you have to buy land directly from owners and we will not facilitate it.

This policy will not work because of what the economists call the “hold-up problem”, related to land sellers. Suppose an industrialist has selected a certain plot. People who own the land are likely to wait for the price to rise significantly before they give up the land. Even if I assume that there are no land sharks and there is total peace and prosperity, this is what is likely to happen everywhere else in the world.

If the price is very high, then it’s not going to be profitable for the industrialist, worse it can open doors to hooliganism. The government has to think a lot more as to how it is going to bring industry in to the state. What has happened so far is any way not going to attract industrialists. The finances of the government are well known. The budget documents say the government is in deep distress. Without some help from somewhere, it cannot carry on any developmental programme.

But the case of Bengal has not been correctly represented in Parliament by MPs. They have been comparing the situation in Bengal with that of Punjab. But they don’t seem to know the history of Punjab’s loan that was partly waived and restructured. Those loans were incurred during insurgency and the amount was around Rs 5,000-6,000 crore.

Our loans are much larger. According to the budget documents, West Bengal’s principal and interest payment stands at Rs 25,500 crore. So there is no comparison and we cannot ask for a waiver or moratorium, citing the Punjab example. Our loans were accumulated by irresponsible behaviour of the government. We should be able to come up with a more sophisticated reason for our demands.

Dipankar dasgupta
Former economics professor, Indian Statistical Institute