Two sides to a coin

The UPA government has had a troubled term, with the Congress having to grapple with a variety of scandals and controversies incessantly dogging its administration. In the lead up to the General Elections, the government has attempted to implement several policies to purportedly benefit India’s poor. It is no secret that these policies have been implemented with more than a key eye to the upcoming elections.

The government has come in for a lot of criticism from several quarters and much of this criticism is indeed warranted.  In a bid to salvage the situation somewhat and to counter the seemingly irrepressible Narendra Modi tide, the Congress is attempting to use any tool available at its—or rather, the state exchequer’s—disposal.  Populist policies designed to appease scores of millions of the Indian poor are designed to win the UPA another term in government. While one bill passed is grossly irresponsible, another is likely to stand the country in good stead.

The food security bill, for long the Congress’ chief policy goal, has been successfully passed and is on the verge of becoming law. The bill proposes to make food a legal right for Indians by subsidising it for about two-thirds of the population. The bill will provide the poor with grain such as rice, wheat and millet for almost free, in the process costing the exchequer about $20 billion every year, a luxury India most definitely cannot afford.

The will place an immense strain on its already floundering economy. Problems relating to corruption and the logistics of such a grand operation are another matter altogether.

On the other hand, the land acquisition bill passed last week is perhaps as populist, but—in this column’s view—is different in that it will actually benefit the Indian economy. The bill ensures that farmers and small landowners will get paid fair compensation for the sale of the land, and also requires that 80 percent of people living on the land must acquiesce for anyone to buy it.

Furthermore, the bill lays out that farmers and small landowners will have to be paid up to four times the market value for land acquired in rural areas and twice the market value in urban areas for their land. This is good news for small landowners in India.

The bill has naturally come in for criticism from Indian industry, which contends that it will hamper industrial investment in the country and could make projects unsustainable as a result of the high costs associated with the acquisition of land. This view conveniently overlooks the fact that at least a template has now been laid for the acquisition of land, a bitterly divisive issue over the last few years with little to no clarity.

The lack of regulatory clarity over land acquisition has been one of the major reasons stalling investments in several industry sectors, with projects sometimes having been put on hold for years or sometimes even scrapped altogether. It has also been a pressing issue for those looking to invest in the country’s infrastructure.

What this bill will (hopefully) do is remove uncertainty surrounding the purchase of land. It does so at a high cost that the government stipulates should be borne by industry, but the benefits likely to accrue to them are only going to be significantly greater.

And unlike in the case of the food security bill, the land acquisition bill may actually serve to solve some problems rather than creating others.

(This was a column that appeared in The Himalayan Times on 8 September 2013)