Growing Irrelevance of Land Ceilings

Should rural land ceilings be raised to enable corporate houses to start commercial farming? Prime Minister Deve Gowda thinks so, and so does Mr Jyoti Basu, but agriculture minister Chaturanan Mishra is dead against it. He believes the implemention of land ceilings and distribution of surplus land to the landless is a vital means of reducing rural poverty.

I think Mr Mishra is out of date. Land redistribution could indeed have made a significant difference at Independence, when the population was much smaller, the availability of land per head was much greater, and the landless faced bleak economic prospects (real wages were stagnant). Today, all three factors have changed, to the point where land redistribution has become almost irrelevant to poverty alleviation.

Our population has virtually tripled since Independence to 950 million. But the cultivated area has edged up just a bit to 162 million hectares. So even if all our land is distributed equally among the whole population, each recipient will get barely one-sixth of a hectare. Re-distributing such tiny parcels of land can only redistribute poverty, not solve it.

Land ceiling laws have been evaded, and one estimate by Dr Raj Krishna puts the evasion at 4 million acres (1.6 million hectares). This may sound a lot, but amounts to only one per cent of the total cultivated area. Moreover, half of this lies in arid and semi-arid regions with miserable and uncertain crop yields. I have no objection to solving one per cent of the problem in this manner, but what about the other 99 per cent? That needs solutions which are not dependent on land.

In the early decades of Independence, landlessness was taken to be a sign of absolute misery. It was thought to be the fate of those who had lost their land and were now on the brink of disaster. This was never true, and is less true than ever today. The landless often make a much better living than those with land. There is no correlation between landlessness and poverty. Take a look at the accompanying table.

Note for a start that the proportion of landless is only 14.3 per cent, while but the proportion of poor is 39.2 per cent (as estimated by the Lakdawala expert group). So clearly most poor households are landed ones.

On the other hand the landless are well above the poverty line in prosperous agricultural states.

This is especially evident in Punjab, the richest state, where landlessness is the highest in India but poverty is the lowest. On the other hand Orissa. the poorest state, has very little landlessness (only 5.1 per cent). Manipur has virtually no landlessness, yet its poverty ratio is two and half times as high as Punjab\’s. Some poor states have high landlessness and some low. There is simply no correlation beween the two.

The table also shows that there is little direct correlation between tribal areas and poverty. The tribal north-eastern slates all have lower poverty ratios than the all-India average.

Not yet convinced? Very well. Look at the increase in landlessness. This increased from 6.2 per cent in 1983 to 14.3 per cent in 1987-88 according to the NSSO. Did this strident increase in landlessness led to greater poverty ? Not at all. Indeed, poverty in this period fell from 46.5 per cent to 39.2 per cent according to the Lakdawala expert group methodology, and from 35.0 per cent to 25.5 per cent according to the Planning Commission methodology.

Why did the landless fare so well? Because real rural wages (adjusted for inflation) rose dramatically. This was not always so. From independence to the mid-1970s, real rural daily wages sometimes rose and sometimes fell depending on the monsoon, but at all. Then, between 1975 and 1991 real daily wages suddenly started galloping upwards at a compound rate of 3.35 per cent, for a cumulative increase of almost 75 per cent. Since rising wages generally denote increasing demand for labour, the number of days worked per year must have risen too. So, real wages per year may have doubled.

This was due mainly to the spread of the green revolution over most of India after the mid-1970s. The green revolution led to higher food production and hence lower real food prices (that is, food prices). On the other hand, the green revolution increased the demand for labour, driving up wages. Even more important, rural prosperity sparked non-agricultural activity like construction, transport, repairs and retailing. The really big demand for labour came not from agriculture directly but from non-farm rural activity, especially construction.

There is a clear lesson in this for poverty alleviation. It cannot be achieved by land ceilings and redistribution because there is too little to redistribute. It lies in moving an increasing part of the workforce out of agriculture into more productive activities that pay higher wages. This does not-imply migration to big cities. The additional employment will come mainly in rural areas themselves.

It is ridiculous that agriculture, which contributes only 30 per cent of GDP, still uses 60 percent of the workforce. Fortunately, increasing numbers are moving into non-farm rural activity, and we need to focus on accelerating this trend. This is best achieved by increasing rural productivity, which in turns sparks non-farm rural activity.

How do we go about this? Well, the green revolution in cereals has done a lot, but cannot do much more. In future increased agricultural productivity will have to come from high-tech agriculture and the cultivation of high-value items (fruit, vegetables, seeds, animal husbandry). Quality control and high-tech agriculture will be facilitated by corporate farming (though contract cultivation can also achieve this goal to some extent). The main impact of such farming will be not in direct farm employment but in increasing the demand for non-farm labour.

The key to poverty alleviation lies in rural growth based on higher productivity, not one distributing tiny parcels of land.

Landlessness and Poverty (1987-88):

Source: National Sample Survey 1987-88 and Lakdawala expert group on poverty