Addressing the land question: Focus on equity

In my previous article, I unpacked the problem of iniquitous allocation of land resources in three domains.

Solving the misallocation problem is not, therefore, merely a question of fixing markets and incentives. It requires societal acceptance of the ailment – the use of land to enhance inequalities and promote narrow rather than broad prosperity. Policy solutions will be effective if, and only if, they increase inclusivity.

The first and most immediate task is to agree to a single principle governing the deployment of all types of land.

Every redeployment or deployment of land should be demonstrated to reduce inequality. 

In the case of private residential land, deployment keeping equity considerations paramount will be tough. Noisy, selfish elites, especially the so-called “middle class,” by now addicted to real estate appreciation, will have to be discouraged by using policy measures from treating residential real estate as a capital investment.

Several fiscal and regulatory instruments exist for this purpose. (For example, taxing luxury developments so that the rate of return on them is lower than on more equitable developments, imposing an absolute ceiling on the development of high-end residential property until 90 per cent of the existing stock is occupied or rented etc.) The key would be to (a) notify and quantify these instruments and (b) link changes in valuation to a public benchmark such as a geographically calibrated consumer price index. Many other suggestions in the 2014 proposals (cited in the previous article) are of immense complementary value in this endeavour, but the crucial thing is to accept that any redeployment of land that reduces equity will not be countenanced. Note that compensating people for their land is not equitable. The key question, when it comes to equity, is what the land will be used for. 

This proposal in no way increases government control over private property. Land is already highly regulated in terms of the conditions underpinning its use and development. However, the principles of regulation remain unclear. I am proposing one single simple principle — no redeployment of land that demonstrably increases inequality should be permitted.

The same principle would apply to redevelopment for commercial or industrial purposes. What activity, who gets employed, and whom do profits and surpluses accrue to become germane to approvals granted. It, therefore, follows that more inclusive and more egalitarian economic activities would be preferred for land allocation to less equitable ones. Hence, the total expected share of wages versus profits, employment effects, benefits or costs to ecosystem services of the activities to be carried out using the land would all be pertinent factors.

With government land, the first urgent task is to unify its ownership — a complete and public listing of all land owned by the state. This sounds trite until you realise it has not happened for 75 years – ambiguity permits obfuscation and pandering to vested interests. The current government had started an initiative to do this but it fizzled out — for obvious reasons.

The same equity principle applies to India’s biggest landowner. For this, it is necessary next to have a land use mapping of what the government does with its land. How much of it has been given over to private debauchery by the bureaucrats and generalissimos? How much to “housing societies” and developers? Once this is known, the contours of corrective action can be defined. For the future, a simple principle: State land will never be sold or handed over to any entity. It will always be leased, the title being retained by the state. This is a common enough practice, except subject to atrophy, so a system of decennial reviews can be instituted to see if the land allocated is still being used for purposes intended, and if those purposes are still relevant. The state has many equitable projects for which it can prioritise public land. A slum-free India, a world-class education and health system, infrastructure, water supply and universal sanitation — all these initiatives require land, which the state has in abundance. The key will lie in unlocking it and using it to serve the public interest, not just that of the rich and of state courtiers.

The Commons should be least complex, but are in fact the most difficult. In contemporary times, the rich have both money and leisure to acquire things that development destroys — those that nature offers. From five-star hotels in the Jaisalmer desert to the mass migration of the Delhi elite to create the ecological mess that is Goa, to the nepo babies engaged in privatising the Himalayas for expensive ecosystem adventure sports, the Commons have become a site for elite extraction. Mining depredations in the Chhattisgarh and Jharkhand forests, and the consequent disempowerment of Adivasis, is well-advertised — but the phenomenon is more widespread than that. Indian elites consider it their divine right to have first claim over our Commons — and the Indian state, a petty landlord obsessed with revenue crumbs, actively collaborates.

This poses a difficult socio-political challenge. Those disempowered are not part of the social mainstream and electorally not significant. But it is a journey we must undertake as an ideological prior if we are to have a Commons in line with the “traditional” Indian values we like to go on about nowadays. At the very least, since we have become such an obsessively religious country, should our pilgrimage Commons prioritise the rich? Should the devout be allowed to deplete the Commons so that they can visit Vaishno Devi in helicopters? Should Sri Ayodhya be parcelled  out to developer oligarchs because Uttar Pradesh is poorer than Gujarat?

An equity-based approach to land is difficult to implement. But it is indispensable. Remember that the vast majority of countries have ended up in a middle-income trap because it is difficult to overcome. Acting to secure a high-income, inclusive economy is more difficult than just boasting about Amrit Kaal in 1947.

The author is visiting senior fellow, ODI, London, and former member, Economic Advisory Council to the Prime Minister