Monday, November 24, 2014

India Study Group - How "Faster" Land Acquisition & Environmental Clearances May Harm the Economy: November 2014

Glance at any "top five" policy list in India's business media and you're likely to find "faster environmental clearances and land acquisition" - or some variation on that theme - in the list. For instance, Fitch Ratings claims "tough environmental clearances and regulatory approvals" are "key challenges" before the country. Such logic certainly looks attractive. In a country with crippling shortages of basic infrastructure, and with a severe crisis of underemployment, don't we need quick access to natural resources for "development"?  

Therefore, shouldn't the government institute an "easy", "single window" approvals process - coupled with "generous" compensation to "farmers" to address any opposition?

In this briefing, we examine these issues more closely. What we find is precisely the opposite of what is usually claimed: in reality, land is underpriced and acquisition is too easy; clearances are guaranteed and given quickly. Rather than addressing the real root cause of the problem, the 'reforms' being pushed at present are likely to:
  • Increase cronyism and non-transparent, arbitrary allocation of resources, as in previous "mega-scams";
  • Fail to address delays and resource bottlenecks for necessary infrastructure, inducing more delays;
  • Increase impoverishment and resultant social conflict (now affecting at least a quarter of India's districts), particularly in resource rich areas;
  • Increase the risk to India's financial system from bad loans, investor defraudment and overall volatility.

Read more: