India’s fragmented, opaque, hidebound and overvalued land market could benefit much more from computerization and easing of restrictions than it has so far from half-hearted land reforms, a new World Bank study argues.
In a soon-to-be-released report titled India: Land Policies for Growth and Poverty Reduction, the Bank says that computerized registration of land deeds, which is fully or partly completed in Karnataka, Andhra Pradesh, Maharashtra, Rajasthan and Tamil Nadu, has helped realize large benefits.
Acquiring or selling land, especially agricultural land, has been a vexing issue in India, mired in ancient laws, bureaucratic red tape and issues of rights. Many tribal people, for instance, live and work on land without clear ownership.
In many areas, the line between state or community and individual ownership is often blurred. In recent months, violent disputes over large-scale acquisition of rural land has delayed a proposal to create special economic zones throughout the country.
A 2001 McKinsey Global Institute report had said that “land-market distortions account for close to 1.3% of lost growth a year, but largely remain excluded from public debate. …Most land parcels in India—90% by one estimate—are subject to legal disputes over their ownership.”
Due to unclear records and lack of legal support, non-farm land in India is among the costliest in the world. Such land in New Delhi was 10 times more expensive than in Tokyo and 50 times more expensive than in Kuala Lumpur at the start of the decade and would be more expensive now because of the housing boom that followed.
The study says that households in states with higher levels of land reforms saw welfare and investment improve much more than households in states with lacklustre reforms. But, that positive effect has been decreasing over time and land reform legislations are no longer effective in transferring land to the poor.
Until 2005, only 5.45% of land under tenancy and 4.41% of the area under ceiling had been affected by reforms, benefiting a total of 7.5% of the population. The highest was in Kerala and West Bengal, benefiting 12.5% and 10.8% of the population, respectively. But the share of land remained less than 20% even in West Bengal, well known for its tenancy reforms, dubbed Operation Barga.
Land is so fragmented in India that a 3.3 million sq. km area is divided into 500 million parcels, the highest in the world, compared with the other extreme, Australia, where only 11 million parcels are on 7.6 million sq. km.
And 28% of these Indian parcels are locked in disputes in peri-urban areas. Some 40% of pending civil court cases are connected to land disputes.
Computerizing records saved Karnataka Rs80 crore of bribes and Rs6.6 crore worth waiting time per year, the report asserts. Computerization has increased the number of registered land transfers and begun yielding a good revenue income to the states. Also, by creating an easily accessible registry, it has helped make the land administration system cheaper, secure and flexible, the report said.
Land revenue income of states had steadily declined until the 1980s, from 30% of total own revenue in 1957-58 to only 1.67% in 1990. But, post-computerization, for instance, Maharashtra’s stamp duty collections more than doubled, from Rs1,624 crore in 1998-99 to Rs4,137 crore in 2004-05. This happened even after stamp duty was cut from 13% to 8%.
Maharashtra has also scanned 100% of its village maps, and Karnataka and Gujarat are on their way. Already, states such as Madhya Pradesh, Orissa and Rajasthan maintain their land records online and others such as Karnataka and Gujarat are expected to follow.
The study draws on a review of land records, survey and settlement, and registration in 14 states over 1982-99, as well as a nationwide survey by PriceWaterhouseCoopers that was completed last year.
The study cautions that the process is not yet complete. Although 12 out of the 14 states in the sample had digitized more than 85% of their textual records, only five had banned the use of manual records. The study says that unless manual records are banned, there is a chance that computerized records will not be properly maintained.
The report also finds that unlike countries such as China and Vietnam, where economic growth has prompted an explosion in land rental, the Indian rental market has declined steadily.
Encumbrance certificates, a paper that contains all registered dealings for a given parcel of land over a certain period, are notoriously difficult and time-consuming to procure. In Madhya Pradesh, it takes 30 days to get one certificate.
Delays of two to three years in registering land is also not uncommon, the report notes.