New Delhi: India’s railway ministry said on Wednesday it would not seize private land for new projects, a move underscoring the political difficulties of acquiring land for large-scale infrastruture or industry.

The decision is seen as the latest blow to industrialization efforts of the Congress party-led government, whose key allies are blocking reforms like easier acquisition of land and privatization of state-run firms.

“It will be a drag on the the overall economic growth prospect as infrastructure is key for growth," said N R Bhanumurthy, senior economist at the National Institute of Public Finance and Policy.

The railway ministry said it would also review past land seizures, mostly from farmers. It needs land to proceed with a $5.8 billion project to connect Indian regions and spur economic activity.

With two-thirds of India’s billion-plus population dependent on farming, land for industry are a touchy issue. Violent protests have disrupted projects and politics plays a part.

The ministry is headed by Mamata Banerjee, whose regional Trinamool Party won a general election in May on an anti-land acquisition plank in the eastern state of West Bengal.

“This decision by Mamata Banerjee has been clearly taken with an eye on state elections in 2011. She does not want to take any chances now," said Kuldip Nayar, a Delhi-based political analyst.

Banerjee has opposed government efforts to enact laws on land acquisition.

Trinamool organised protests against a proposed $3 billion chemicals hub to be built on farmland and the government abandoned the project.

Last year, her party opposed acquisition of land from farmers for setting up of a factory by Tata Motors for its cheapest car “Nano" in West Bengal. The project was shifted to non-agriculture land in the western state of Gujarat.

Farmers’ protests have also forced cancellation of special economic zones and other projects in four other states. A total of 230 tax-free export zones have been put on hold.

“Land acquisition is a big issue whether for rail or SEZ projects. We cannot forget the political side," Bhanumurthy said.

A new Goldman Sachs report on infrastructure released on Wednesday said land acquisition was among the main risks.