The Indian government issued an executive order to make it easier for companies to buy land and eventually replace a law that critics said has hindered manufacturing and constrained economic growth.
Indian Prime Minister Narendra Modi’s administration on Monday announced the ordinance to spur infrastructure development in rural areas. It exempts at least five categories of land acquisition, including for industrial corridors, from rules that require the consent of at least 70 percent of potential sellers. The order must be approved in the next session of the legislature, which starts in February, if it is to come into force permanently, according to PRS Legislative Research.
“It will definitely bring more clarity for investors,” Crisil Ltd chief economist Dharmakirti Joshi said in Mumbai. “One of the main ‘pain points’ has been the fuzziness of the land acquisition act. For any business to succeed, they want more clarity. Nobody wants to take a regulatory risk.”
The measure is intended to boost growth in Asia’s No. 3 economy from near the slowest pace in a decade and accelerate Modi’s plan to urbanize the nation. Not one large tract of land has been acquired for development since the nation’s previous government passed an act in January that was supposed to make the process more transparent.
More than 1 trillion rupees (US$15.7 billion) of projects are stalled as a result, including 600 billion rupees of roads, 20 new coal mines by state-run Coal India Ltd and steel mills for ArcelorMittal SA and Jindal Steel & Power Ltd Co.
India’s land laws have bedeviled development for decades, as consecutive governments courted votes from the nation’s 800 million rural residents. Previous rules forced owners to sell land if it was considered to be in the public interest. The laws were abused, leading to clashes between farmers and officials that fueled Maoist rebellions in some mineral-rich states.
Each of India’s 29 states is to adjust its own laws to conform with the new Indian federal policy, Indian Minister of Finance Arun Jaitley said at a news conference in New Delhi on Monday.
Besides industrial corridors, other categories exempt from existing acquisition rules include housing for the poor, rural infrastructure and defense.
The move is expected to bring only partial relief, as manufacturers would probably still have to adhere to the current law and some conditions such as rehabilitation and resettlement remain on all projects, Mumbai-based Goldman Sachs Group Inc analysts Pulkit Patni and Mohit Soni said.
This is the third time this month that Modi’s government has resorted to issuing an executive order to accomplish an objective, after parliament’s session ended on Tuesday last week without votes on several key bills. Modi also has issued orders to permit more foreign investment in insurance and to make coal mining more transparent.