Atwater 1986 conference on the world information economy: Risks and opportunities: 4–7 November, 1986. Montreal, Quebec, Canada Organisers: International Institute for Information and communications

Abstract

In a populous developing country such as India, developmental interventions are often woven around land, as this is the most critical resource in the livelihood support system of rural communities. In such a socio-economic environment, land has multiple uses. It is the most important source of income, a symbol of social status and prestige, and has very high collateral value for resource poor farm families. In these countries, the migration of rural workers to urban centers in search of employment, coupled with universal individual inheritance characteristics of land ownership, perpetuates the fragmentation of land holdings. In the majority of such cases, the point has been reached where land has become uneconomic and non-viable for cultivation. For farmers left with uneconomic land holdings there are only three options available; sell the land, rent it out, or lease land from others. In such scenarios land lease and land market policies assumes critical importance.India has one of the most restrictive and unorganized land sales and rental markets in the world. Such restrictive land sales policy can be traced to the historical socio-economic realities of the country. Historically, distress land sales have been very common. Under the restrictive poor land marketing environment of India, transaction costs for buying land are very high. Government imposed land sales taxes such as stamp duties which have to be paid upon registration of a transaction, further increase the total cost of land sales. Analysis of state level data on rental restrictions in India along with a nationally representative survey, indicate that rental restrictions negatively affect productivity and equity. Land rental restrictions reduce the scope for efficiency-enhancing rental transactions that benefit poor producers.This study attempts to identify drivers of the land market in India and compares level of resource productivity under different land lease arrangements. Such a study may offer valuable input to land policy planners in the formulation of land sales and land lease policies for agricultural land.The results of the study have important policy implications as the study suggests that there is little justification for restricting the functioning of land markets. The dominance of marginal and small farmers in land sales highlights the economic non-viability of marginal holdings. The prevalence of tenancy among various types of farmers suggests the need to grant legally recognized status to tenancy. This may protect the interest of both the lessor and lessee. Corporate farming/contract farming will need to be justified based on both economic and social considerations such as the cost of contract enforcement to marginal and small farmers after they enter into contract with the corporate sector.Results also indicate that while various short-term land lease arrangements have different production efficiency levels, differences in productivities across the land lease arrangements are relatively small. As such, it is difficult to view lower input use as a consequence of land lease arrangements. However findings do suggest that various short-term land lease contracts are relatively less productive than owner cultivated land. Decomposition of the factor intensity levels in the study identified chemical and seed inputs as the major source of differences. In conclusion, short-term land lease patterns do not constrain productivity at the current level of development in the Bundelkhand region of Uttar Pradesh and there is little justification for restricting the functioning of land markets.