Second, the land recording system is suboptimal, and so the resultant uncertainty increases litigation. Third, land markets are characterized by property-related litigation and administrative delays that disproportionately affect the poor. Although the central government as well as state governments have attempted to improve these problems, their efforts have been slow relative to the tectonic shifts in the Indian economy in the past three decades.Īfter 1991, the Indian government has progressively reformed other markets, while leaving land markets unreformed. These reforms freed up significant entrepreneurial energy by removing licensing requirements across many sectors. But reforms in other markets, such as in the capital markets, have significantly shaped developments in land markets. This arguably has led to high real-estate costs and informality (where new settlements come up on government land with de facto possession but no legal ownership). In urban areas, the use of land for residential and commercial purposes is greatly restricted. In general, the land laws prevent transfer of agricultural land for nonagricultural uses, transfer of land to nonresidents, or both. Since land in India is a state subject, these restrictions vary state by state. First, land laws restrict transferability or permit transfers under restricted circumstances. India’s land markets have historically been determined by three major issues. While the State (especially the state governments) has been responsive to these changes, it has operated within significant constraints informed by outmoded ideas. Second, the State itself has had to cope with these changes through various mechanisms, such as benign neglect and strategic enforcement, or through ad-hoc policy changes to accommodate and facilitate growth. First, economic growth has exerted pressure on land markets to an extent that this role of the State seems increasingly out of sync with the reality of urbanization, as well as the transition in the rural economy toward nonfarm employment. But two factors have made this role increasingly unnecessary. The formal role of the State continues to be that of occupying the commanding heights of the markets and determining their how, what, and where. India’s rapid growth following the reforms of 1991 has taken place without a concomitant reform of land markets.
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