Colonial Origins of Restrictions on Land Transfer in India

Lack of access to credit is often argued to be an important determinant of poverty. This lack is often traced back to the poor not having collateral. This absence of collateral in turn has been linked to the fact that the poor don’t have titles to their land. Hence land titling has been proposed by scholars such as Hernando de Soto and such policies have been implemented in various countries, with support from international organizations. In India, however, right from independence, there has been concern that credit-with-land-as-collateral exposes vulnerable sections of society to exploitation. For instance, the Fifth Schedule (Article 244, (1)) of the Indian constitution provides that the Governor of a state may, in Scheduled Areas, pass laws to “prohibit or restrict the transfer of land by or among members of the Scheduled Tribes in such area.” The concern regarding the land-credit connection is explicit: the Governor may “regulate the carrying on of business as money-lender by persons who lend money to members of the Scheduled Tribes in such area.” Such concerns have driven policy measures in various states, from the Karnataka Scheduled Castes and Scheduled Tribes (Prohibition of Transfer of Certain Lands) Act, 1978 to recent attempts to restrict landownership by non-residents in Uttarakhand (http://www.holidayhometimes.com/buyers-guide/restrictions-buying-land-uttarakhand1954.html).

Are such policy measures advisable? Will they actually protect the intended beneficiaries, or harm them by reducing access to credit? Can these laws be easily evaded? Colonial India provides a useful laboratory to investigate such questions, because several types of such policies were tried. The first major initiative, the Deccan Agriculturists’ Relief Act of 1879, tried to prevent land transfer by empowering the courts to investigate transactions and protect the borrower from fraud. But lenders evaded the law by disguising loans as sales of land with repurchase at a higher price. The Punjab Land Alienation Act of 1900 took a blunter approach: land transfer by peasants, for any reason, was restricted to tribes identified as “agricultural” within the district. This perhaps had the effect of strengthening rich peasant-lenders by driving out trader-lenders, reducing competition in the credit market. In the Central Provinces a law was passed in 1903 to prevent “non-agriculturist” trader- lenders from seizing the land of tribals who were tenants, but had secure occupancy rights. This sometimes led to tenants surrendering their rights to their landlords, who would sell them and repay the lender. In all these instances the borrower and the lender colluded to evade the law, because the borrower’s credit needs were compelling. Would the colonial state have done better by providing the poor cheap credit, rather than by intervening in the land market?

This project will rely on archival research, substantially at the British Library, but also in libraries in India and the U.S., to analyze the strengths and weaknesses of the main strategies used by the colonial state to discourage land transfer. The experiments and evidence excavated will provide useful perspective to the present-day policy-maker on the value and design of measures to protect the poor from land loss, given their need for credit.