Land acquisition and structural transformation in Bihar: An analysis of alternative approaches

It has long been recognized, since at least the ‘Lewis model’, that an essential ingredient of growth is the structural transformation of the economy – from agriculture to industry, from the production of primary products towards increasingly more complex manufacturing, usually accompanied by a process of migration from rural to urban areas. In the case of Bihar, this process has been notably slow, even as industrialization has proceeded at an unprecedented pace in some other Indian states. As the government of Bihar recognizes, one of the major constraints on industrial growth has been the difficulty that industry has faced in acquiring land, either directly or through the state government.

At the risk of belabouring the obvious, any relaxation of the constraints on industrial growth would have a direct effect on growth in Bihar’s GDP. At the same time, appropriately formulated policies would also take account of the distributional consequences, especially for small and marginal farmers, and for landless labour, who have been among the poorest of the poor. Industrial growth, or even growth in general, is rarely an end in itself – rather, it is a means of improving the level of societal welfare. So any research that helps in the formulation, or implementation, of policies that are widely seen, especially by the affected parties, as being ‘fairer’ or more respectful of equity considerations, would also be consistent with the government’s efforts to promote “inclusive growth”.

This project has three main objectives: One, the construction and analysis of a theoretical framework to evaluate the various options open to the government of Bihar to facilitate land acquisition for industrial development, either directly, or by intermediating transactions between agriculturists and industrialists; and to examine ways in which compensation for the land can be provided in a fair, practical and economically efficient way. Two, this analysis will be informed by case studies, building on surveys of recently completed private transactions in which industry has acquired agricultural land without government intervention. Three, we will survey landowners and other potentially "affected families", as defined in the Land Acquisition and Relief and Rehabilitation Act 2013, (LARR Act 2013) which also encompasses landless families whose livelihoods are primarily dependent on the land (or forest, or waterway) being acquired. The survey will be designed to elicit the views of these stakeholders with regard to the alternative land acquisition mechanisms (described in the research design section), and with regard to the feasibility and desirability of the quantum and mode of compensation envisaged in the LARR Act 2013.