Datanomics: ULCA repeal alone no guarantee of manufacturing, infra boost

Repealing the Urban Land Ceiling Act may improve land availability, but manufacturing and infrastructure growth also depend on ease of doing business and broader reforms

West Bengal Finance Minister Swapan Dasgupta announced in his maiden Budget speech that the Urban Land (Ceiling and Regulation) Act (ULCA) of 1976 will be re-examined to unlock the potential of developable land, attract major investments, and fuel economic growth in urban areas. Thirteen states have so far fully repealed ULCA to boost manufacturing and infrastructure as these sectors require large pieces of land. However, data shows that this may not always happen. Of the four states that repealed the ULCA this century so far, three saw a marginal increase in their manufacturing economy share. After the repeal, the manufacturing shares of Odisha, Assam, and Andhra Pradesh grew by 2 to 3 percentage points compared to their pre-repeal averages since 1991-92. However, Maharashtra's share declined by five percentage points. Industry, which includes mining and quarrying, electricity, and construction (parts of which reflect infrastructure), besides manufacturing, saw its share rise in Assam and Andhra Pradesh, while it declined in Odisha and Maharashtra. However, the share of Maharashtra's economy in the national economy rose, while that of the other three states declined in the national gross domestic product (GDP). Share of manufacturing in GDP at the national level declined in recent years, while that of industry remained largely stagnant. This shows that while repealing ULCA may be required to boost manufacturing and infrastructure, other factors such as “ease of doing business” are also key.