Tuesday, September 21, 2010

Land Reforms - Likely at a Higher Price

Unlike China, India doesn't have any control on Costs. Right from day one we have said that India can never replicate the Chinese model of SEZs and you know the mess 4 years after we have said.

As India moves to a higher growth trajectory, industrialization and urbanization will necessitate the continuing need for land acquisition. There will constantly be issues that will warrant an effective balancing act between development and the EEE. There could be delays and at times politics may prevail over economics. However, if land reforms do come through, it should speed up economic development but will most surely come at a higher financial cost for business and be supported by higher socio-economic pay-off.

This makes reform imperative on (i) land acquisition related issues and (ii) viable resettlement and re-habilitation policies. To this end, the recent political focus and proposed amendments in land acquisition/mining bills (annuity and royalty/profit sharing) - if implemented could unlock development value that's currently trapped in land.

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