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Resource centre on India's rural distress
 
 

Industrializing India leaves little room for farmers by CJ Kuncheria


Jagdishji Vaghela is one of hundreds of thousands of farmers standing in the way of India's breakneck economic expansion.

Determined not to give up his land for an industrial park in the western state of Gujarat, the 55-year-old farmer scorns at talk of how the benefits of industrialization in Asia's third-largest economy will trickle down to people like him.

Despite a nearby plant producing what is touted as the world's cheapest car, he pointed to a water-logged track leading to his village. "What is this development they are talking about? Look at the road, it's completely flooded," Vaghela said.

"I won't give it (land) away. If we give it what do we do? We will have to search for jobs, but even they are not available."

As India industrializes rapidly, resistance from farmers such as Vaghela and rows over acquisition of farmland for industry have become a sensitive issue in a country where two-thirds of the 1.2 billion population is dependent on agriculture.

But Vaghela knows his options are limited.

Farm income is declining, his crops have repeatedly failed and if he holds out too long, he risks having the land lose its value as it remains a land-locked enclave between factories.

The uncertain future he and other farmers like him across the country face has led to a string of violent protests against attempts to acquire land for factories, power plants or roads, posing a risk to India's economic ambitions.

"The bigger picture is that land is an issue. It is one of those areas that India needs to up its game," Kevin Grice, senior international economist at Capital Economics in London, said.

"India scores relatively poorly and it is due to micro issues like land, red tape and cumbersome laws," he said, referring to India's 133 position in the World Bank's ranking of ease of doing business.

While few believe foreign interest in India will taper off, these issues could delay a much needed acceleration in the amount of foreign investment pouring into the country.

BREWING DISCONTENT

How India soothes the discontent brewing amongst the tens of thousands of farmers may determine the economic and political future of the country where the rural population is a crucial vote base for both ruling and opposition parties.

Mindful of the social and security concerns, top ruling politicians have said acquisitions should skirt fertile and productive land, and farmers ought to be adequately compensated and offered alternate jobs.

The issue may become a political hot potato this year, with the ruling Congress party championing farmers despite clamor from industry and investors to make it easier to acquire land.

Vaghela says he and his fellow villagers had high hopes when Tata Motors decided to set up in Sanand the plant that builds the $2,500 Nano car, after huge protests forced India's top vehicle maker to relocate in 2009 from West Bengal state.

"We had great expectations from the Nano plant, that we'd get money, we'd get jobs. But what has come out of it? None of our people have got jobs. We don't have the qualifications."

Protests can scupper projects, as Vedanta Resources discovered last month when the government shelved the UK-based miner's $9.6-billion plan to mine bauxite on lands in the eastern state of Orissa held sacred by indigenous groups.

Other high profile projects, like those by top steelmakers ArcelorMittal, POSCO and Tata Steel to set up mills, too have been held up as they face problems in getting land from farmers.

Under the current law, the state can take over any land for a public purpose with little compensation.

Protests against land acquisitions are not new in India, but have become more visible recently as the economy grows at its fastest pace ever and as income inequalities widen.

But there is growing realization that compensation must be adequate if industrialization has to proceed smoothly, with the government considering changes that will offer the owners market rates and even equity stakes in the industries being set up.

RISKS FOR INDUSTRY, GROWTH

Land promises to be a politically charged issue in crucial state elections this year and next, especially after the ruling Congress party backed farmers protesting against a highway being built on their lands in the northern state of Uttar Pradesh.

At Sanand, the government had initially faced protests, but much of it has calmed down after it hiked compensation by a third to nearly 4.86 million rupees ($105,000) per acre.

While this might be a fortune for many where annual per capita income is $3,100, the figure hides the fact there are many people dependent on the same plot of land and farmers have mortgaged land and racked up debt with usurious moneylenders.

In Siyawada village, Kanjibhai Parmar, the 60-year-old patriarch of a seven-member household, has just inked his approval for handing over nearly 13 acres of land.

Over two-thirds of that land is with a moneylender, whose dues have doubled to 600,000 rupees in two years. He borrowed the money after his crops failed repeatedly.

"The government has opened up one more way to survive, selling off our land. Else we would have mortgaged it," he said. "With the money, we will repay our debt, buy a tractor and get land elsewhere."

But for smaller farmers like 40-year-old Nanjibhai Karsanbhai, who has 12 family members on his 7-acre plot, there will be little left over to purchase land.

"I have no other land, I won't give it up," he said. "What will I do with the money? Eat it?"