T H E E C O N O M I C W E E K L Y Ju ly 28, 1056

Land Reform in Uttar Pradesh

IN the present struggle for econo­mic development it has become

axiomat ic tha t l and r e f o r m is a prerequisite to any advance. The reforms w h i c h are considered es­sential are the abol i t ion of landlords and other intermediar ies between the state and the ac tua l cul t ivator . The concept of l and re form is a legal one a m a t t e r of t i t les and l a n d r e f o r m legislation i n I n ­d ia since independence has general­ly been directed towards the abol i ­t i o n of cer ta in ti t les to land and the t r ans f e r of t i t l e from landlords to tenants. I t is cer ta inly believed t h a t such reforms are necessary be­fore progress can be achieved, and there also seems to be a. widespread feel ing tha t the reforms w i l l lead to progress.

The h i s to ry of land tenure and an analysis of modern ag r i cu l t u r a l condit ions in U t t a r Pradesh lend l i t t l e support to proponents of re­f o r m ; insecur i ty of tenure, harshness of legal admin i s t r a t ion , and exploi ta­t i o n of the cu l t i va to r were a l l wel l on the way to being taken care of fifty years ago.* Present r e f o r m programmes, despite their revolu t ion­a r y phrasing, continue the policies de­veloped by the B r i t i s h admin i s t r a t i on .

Pre-British System Before the B r i t i s h came to I n d i a

the economy was organized in self-sufficient vil lages, w h i c h in t u r n

*So fa r as law is concerned, there is in addi t ion to the content of the legis la t ion the question of how effectively the l aw is enforced. I t was probably true t ha t many r igh ts Were never properly enforced; but t h i s was a result of the fami ly , caste, a n d social system exis t ing in UP( a n d not a result of the legis­l a t i o n Itself . It was a case where the h ie ra rch ica l and f a m i l y oriented social s t ruc tu re often served to defeat the aims of legislat ion The point here is tha t , in so far as legislat ion can g r a n t r igh t s , the legislation on the books in UP before the F i r s t W a r had gran ted nea r ly a l l the r ights w h i c h are considered essential for good tenancy condi t ions . The read­er i s i nv i t ed to compare 19th century leg is la t ion i n U P w i t h post-independ­ence legis la t ion in Punjab a n d B o m ­bay. I t h i n k he w i l l f ind the UP legis la t ion more tho roughgo ing and progressive t h a n t h a t in the Punjab a n d as advanced as t h a t In Bombay .

were groupings of large famil ies . Economic relat ions were governed by caste and custom. Above the vil lage, but not essential to its l i fe , were Kingdoms and empires t a k i n g a share f rom the g ra in heap and t r y i n g as best they could to m a i n ­t a i n law and order. There was no buy ing and sel l ing; the order of economic life had no place for a price mechanism. The great change in Ind ian economic organizat ion occurred when the B r i t i s h introduced the concepts of ownership, sale, and the ren ta l m a r k e t . The o ld I n d i a n system d id not clearly differentiate between economic and pol i t i ca l power, nor between such power and social status. Everyone had r igh ts in the produce of the land, obl igat ions to the vil lage, and a greater or lesser a b i l i t y to enforce his w i l l upon others. The zamindar was o rg ina l ly a collector of taxes, but this stat-ment is mis leading by i tself . U n l i k e the tax collector of today the zamin­dar migh t also be the leader of the highest, caste in the vi l lage, headman of the vi l lage, and senior member of clan w i t h heredi ta ry r igh t s over the vi l lage. W h o can say how many of these characteris t ics make a man an owner in our sense? The ques­t ion never arose.

The complexi ty of r igh t s in land and to the produce of l and was so grea t as to make reasonable any one of several different d i s t r ibu t ions of t i t les and r ights . E v e r y member of I nd i an society had some sort of c l a im upon the l and f rom the raja 's r i g h t to land revenue down to the ploughmen's r i g h t to a share in the v i l lage g r a i n heap.

Assumption of Market Economy The B r i t i s h thought t h a t the m a x i ­

m u m of m a t e r i a l welfare and econo­mic progress would be achieved by l eav ing decisions to those who pro­duced for sale on the marke t . Th i s was a mis take of c ruc ia l importance: a fa i lure to realize tha t r a t i o n a l m a r k e t behaviour occurs only when the owner of l and is producing fo r a ma rke t . In U P nei ther the land­l o r d nor the c u l t i v a t o r were doing so. M a r k e t s on ly al locate resources to their mos t product ive uses when the factors of land , labour, a n d cap i ta l are i n t i m a t e l y connected t h rough w o r k i n g mechanisms. Pres­sures in one sector mus t set up self-cor rec t ing changes In other sectors. Rea l connections between m a r k e t s

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were l a c k i n g and the most i m p o r t a n t m a r k e t for economic progress, the capi ta l marke t , d id not exist in any useful f o r m . The nature of the er ror has never been appreciated by the reformers who believed and s t i l l be­lieve t h a t the er ror l ay in some mis take in the d i s t r ibu t ion of r igh t s among the var ious c la imants . An analysis of the problem shows t h a t true r e fo rm lies in another d i rec t ion .

The h i s to ry of ownership in U P du r ing the f i rs t h a l f of the nineteenth century shows the B r i t i s h m o v i n g in to a society disrupted by rajas, t a lukdars , a n d zamindars compet ing for power. F o r each piece of l and the B r i t i s h recognized one person or group as "owner/ 1 and much l and was given to the w r o n g persons. When the " r i g h t " person go t the land he received w i t h his t i t l e more power t han he had ever enjoyed, whi le the sale of l and for arrears of revenue created a new class of own­ers. About 1820 the B r i t i s h realized tha t m a n y c u l t i v a t i n g tenants had just i f iable claims to a special posi­t ion on the l and and the revenue officers set about record ing these cus tomary r igh t s . Cu l t iva to r s o f twelve year's s tanding were g iven an inalienable but her i table interest in the land, inc lud ing permission to bold at a reduced rent. So began the g radua l encroachment of tenants upon the r igh t s of owners. The policy of increasing tenant r i gh t s a t the expense of landlords received a set-back w i t h the annexat ion of Oudh and the " M u t i n y " , for v i r t u a l l y absolute ownership was g iven to re­bellious t a lukdars who w o u l d sub­m i t peacefully. In the seventies and eighties L a n d Revenue and Rent Ac t s t ransferred more of the powers and profits of ownership to the ten­ants. In the ear ly pa r t of this cen­t u r y tenants were guaranteed seven years at the same rent, and twen ty years la ter a l l tenants received a l i fe interest i n the i r l and w i t h rents f ixed by a Rent Officer. In 1939 these tenancies were made her i table . The t w o ou t s tand ing character is t ics o f l a n d pol icy in U P were the t rans ­ference of the a t t r ibu tes of owner­s h i p to tenants, and the persistence of a l a n d m a r k e t as the f r a m e w o r k f o r a g r i c u l t u r a l o rgan iza t ion . W h i l e i t I s t rue t h a t the owners los t r i g h t s w h i c h we associate w i t h ownership, landlords a n d tenants could j o i n t l y exercise a l l the r i g h t s o f ownership by combin ing .

Walter C Neale

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Limitations on the Market Limi ta t ions on the market did

exist in a number of cases. Special legislation for the Bundelkhand area prohibited non-agriculturists from holding land, and other acts l imited mortgagees-in-possession to twenty years and created procedures for mak ing some lands inalienable at the option of the owner. Debt reduc­t ion and stay of execution legislation prevented the marke t from operating in the o rd inary fashion in the th i r ­ties. The B r i t i s h were wi l l ing to t inker w i t h the sale market, but they never gave it up.

Whi le the Br i t i sh were increasing­ly regula t ing the market, Indians were changing their attitudes. Where­as Indians at first simply did not play the market game, the landlords after a time began to seek ways around the regulations, and in the end we find the population t r y i n g to maximize on a market while the originators of the market were t ry ing to prevent this behaviour because they had found that under Indian conditions it did not br ing desirable results.

Criterion of Past Collections In the course of these develop­

ments, the revenue officers became the focus of an ar t i f ic ial market . In the beginning they tr ied to levy the revenue upon the economic rent, hut, as markets did not exist, it was i m ­possible to compute either the value of produce or the costs of produc­t ion. Then the officers began wi th a " fa i r " sum for a dis t r ic t and ap­portioned the total among the v i l ­lages and then among the landlords. Al though not recognized as such, this change was in tact a very signi­ficant one, for the system replaced the concept of economic rent by the cr i ter ion of past collections. The system was gradually modified to take account of the rents which tenants actual ly paid, but it was al-ways necessary to adjust the record­ed rents to a l low for fraud and peculiarities of local custom. A series of circulars instructed reve­nue officers to use as a basis for cor­rections, and computations of value and rents, the prices of agr icul tura l produce, of s imi lar land recently sold, rents freely ar r ived at elsewhere in the district , and, in effect, all of the elements which ra t iona l men on a marke t would take in to account. The revenue officers were t ry ing to arr ive at those rents and values which a properly funct ioning market wou ld reach automatical ly, but which the Ind ian marke t d id not achieve.

The marke t for land was a fai lure. Contrary to expectations the market system did not b r ing w i t h it a huge increase in mater ia l wellbeing. I t is often said that there has even been a decline under Br i t i sh rule, but the evidence points to a rise in l i v ing standards dur ing the nineteenth cen­tury, al though stagnation and per­haps some decline has since occur­red. But in fact Indian progress has been insufficient to satisfy anyone.

Causes of Stagnation The arguments that are commonly

put forward to explain the stagna­t ion of agriculture in UP are that the laws were harsh and " t r i c k y " ; the laws were evaded; the adminis­t ra t ion was biased against the pea­sants; the assessments of revenue were too high; the level of rents was too high; and that price fluctuations destroyed incentive and ruined the peasantry. Do any of these stand up to the evidence?

The procedural provisions of the law were s t ra ightforward, there were ample opportunities to protect, one's rights, the nu l l i fy ing effect of pub­lic attitudes are beyond the scope of legislation, and from the middle of the nineteenth century onward sales for arrears of revenue were rare. While there were abuses and eva­sions of the law. the figures for acreage and numbers of tenants protected by the laws increased steadily, as did the figures for owner-cult ivated land. Unfa i r treatment. of cult ivators occurred in the early thirties, but the cause agitation by the Congress Party—-was poli t ical . Dur ing the earlier period of Br i t i sh rule, the bias was in favour of the tenant.

The charge that revenue assess­ments were too high does not fit the evidence, for agr icul tural stagnation and reductions in the revenue bur­den coincide. Furthermore, a reduc­tion in the revenue burden would lead to development only on the un­l ikely assumption tha t the poor land­lord would use the increase in retain­ed income for capital Improvements. These same cri t icisms apply to the popular charge that, rents were too high. Also, the h igh rent argument puts the cart before the horse. In a market system the returns to a factor tend to approximate the mar­g i n a l productivi ty of tha t factor, and in Ind ian agriculture the margina l product iv i ty of labour is close to zero. Rent and interest eat up the earnings of agriculture because the product iv i ty of, land and capital is h igh relative to the product iv i ty of

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labour. In evidence submitted to the Royal Commission on Agricul ture , the UP Government said that a re­duction of five per cent in rents would increase the tenants' standard of l i v ing by two or three per cent, while an increase of five per cent in acreage or output (e.g. f rom better seeds) would make the peasant twelve to for ty per cent better off.

There can be no doubt that fluctua­tions in price were a cause of dis­tress dur ing the depression of the thirties, but prior to this time the trend of prices was upward. In UP prices did not show a downward trend before 1920 al though agr icul tural prices in world markets did. The cult ivators were hard hi t by the fal l in prices. They were immune in so far as they produced for their own consumption, but the amounts to be paid for rent and interest on loans had to be raised by selling their produce. However, rents were short­ly reduced to the 1900 level by gov­ernment order. Landlords were less affected except by the fa l l in rents. Sale values of land were main ta in ­ed dur ing the thir t ies and so could meet their obligations in the last resort. While the depression of the thirt ies was a disaster, it cannot explain the failure over the preced­ing hundred years.

Why the Market failed The market failed because the

market organization was not com-plete. Changes in relative values should shift factors from less to more productive employment. In UP there was l i t t le accumulation of capital and consequently labour had no place to go but to the land. Dur ing the thirt ies the standard of l iv ing in the urban centres rose, but there were not nearly enough industr ia l estab­lishments to absorb the excess labour. Such savings as there were tended to go into higher land values for reasons of security and prestige. In addition, much agr icul tural pro­duction was consumed on the hold­ing and so marke t prices had no effect on output. Price and produc­t ion series clearly show that relative prices had no effect on the manage­ment of land. W i t h o u t real choice, the marke t system cannot achieve opt imum allocation.

On the other hand l i v i n g stand­ards failed to rise because there was a failure of capital accumulation. Under any system the ra t io of l and and capital to men must be raised if Ind ia is to progress economically. This is a matter of technology. No change In t i t les to land can solve

T H E E C O N O M I C W E E K L Y Ju ly 28, 1956

i t , but the places where more capi­t a l w o u l d revolut ionize agr icu l tu re are legion.

F o r instance, "overpopula t ion" is not a shortage of land, for capi ta l can a lways substi tute for land, b r i n g new l and i n t o cu l t i va t ion , and i n ­crease the p roduc t i v i t y of o ld l and . The a b i l i t y of l and to support popu­l a t i o n depends upon i r r i g a t i o n , re­c lamat ion , fer t i l izers , seeds and breeds, education, equipment, b u i l d ­ings, f a r m layout , drainage, and choice of crops and ro ta t ions . Change a n d improvement in a l l these require cap i ta l a n d there w i l l be no ma jo r increase in the output of a g r i ­cul ture u n t i l measures such as these are taken , no m a t t e r w h o owns the l and or receives the r e t u r n f r o m the p roduc t i v i t y of the soil .

Capital Alone Can Raise Productivity

The uses of capi ta l to raise the p roduc t i v i t y o f I n d i a n agr icu l tu re a n d a n d the standards of l i v i n g of the

ryo t s are not l i m i t e d to agr icu l ture . Increased p roduc t iv i ty in other fields w i l l improve the purchas ing power of the ryo t , but even more i m p o r t ­ant , there must be cap i t a l invest­ment in indus t ry and services to p ro­vide the mater ia ls and power for the improvements in ag r i cu l tu re . The technological improvement o f a g r i ­cul ture rests as much on the cap i ta l development in other spheres as i t does on the capi ta l development in ag r i cu l tu re i tself .

Beyond the technological consi­derat ions, there are ma t t e r s of orga­n iza t ion . I f the m a r k e t i s to be used to regulate the economy a n d d i s t r ibu te i ts produce—and for the t ime being such w i l l be the case i n Ind i a—then the m a r k e t m u s t be so organized as to f u l f i l l i ts funct ions . We have a l ready seen t h a t d u r i n g the period of B r i t i s h occupation the var ious m a r k e t s were not in te­gra ted , and t h a t i n pa r t i cu l a r the cap i ta l m a r k e t was underdeveloped.

If th is d i f f icul ty is to be overcome, there must be a g rea t increase in the capital resources of the na t ion . I am speaking here n o t of the obvious technological need fo r capi ta l , bu t of the need fo r cap i t a l in order to develop a m a r k e t w h i c h provides a real a l ternat ive to l a n d as a f o r m of investment and a f ie ld of econo­mic effort.

The Real Issues Discussion of the future of I n d i a n

agr icu l tu re has centred on the ques­t ions of large mechanized vs s m a l l peasant f a rms ; and of co-operative vs collective vs State fa rms . B u t these are no t real questions. The on ly a l ternat ives w h i c h are possible a t present are sma l l peasant f a rms and peasant co-operative fa rms , and here the Government 's desire for co-operatives comes up agains t the cu l t iva tor ' s desire for his own plot . The real problems of development are cap i ta l accumula t ion a n d the size of holdings. I t i s fool ish to cast the

The importance of banking to the COFFEE INDUSTRY

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problem of capi tal development in terms of large mechanized farms. Capi ta l improvements are divisible down to the spadeful of manure. Sma l l peasant holdings need steel t ipped ploughs, i ron har rows and wa te r rather than t ractors . The only source of capi tal is agr icu l ture : i n d u s t r y and commerce need a l l the resources they can raise and then more. Thus the conclusion is that the burden of revenue and rent, far . f rom being decreased, should be in­creased in order to finance capital improvements .

The fa i lure of the Inn I market and the z a m i n d a r i system of the nine­teenth and f i rs t hair of the twent ie th century can be a t t r ibuted to the rud i ­m e n t a r y or pa r t i a l state of develop­men t of complementary marke ts and the lack of capi tal development to support those markets and to provide the wherewi tha l of ag r icu l tu ra l i m ­provement. It remains to be seen w h a t the l and re form legislation of UP has done towards remedying the s i tuat ion.

The zamindars have been abolish­ed. In the process the weal thier ones suffered an appreciable degree of expropria t ion. Alongside of the general objective of e l imina t ing "an Obstacle to economic development," the zamindars were abolished in order to equalize weal th . So far as th i s secondary objective goes, there can be no objection to the zamindar i abol i t ion . Expropr ia t ion , t o t a l o r p a r t i a l , direct or t h rough the mecha­n i sm of low compensation and differ­ent ia l rates of rehabi l i ta t ion gran t . Is as good a w a y as any to equalize weal th . ( A l t h o u g h w h y the same results could not have been achieved by a capi ta l levy and estate duties th is w r i t e r does not understand,)

No Direct Assault I t is on the major count, the s t i ­

mulus to development, that the merits Of the l and re fo rm legislation looks SO questionable. At no point does the r e f o r m legis la t ion make a direct assault upon the basic problem.

L a n d re fo rm gave a l l t i t les to l and to the state, w h i c h in t u r n has made the vi l lage governments trustees. However , the s i tua t ion of those on the l a n d has not changed apprecia­b l y . Landlords have lost the l and w h i c h they former ly rented, and have received in exchange on ly pa r t i a l compensation, but they ho ld the rest o f t he i r o ld land as bhumidars w i t h mos t of the r igh ts of ownership. Mos t tenants have become sirdars, w h i c h is merely to say t h a t they are n o w pr ivi leged tenants of the state

ra ther than of a landlord , and they continue to pay the same rent .

F a r f r o m a smal l m i n o r i t y of zamindars exploi t ing the vast majo­r i t y of tenants, perhaps a quarter of the agr icul tura l is ts were zamindars. A l l but one or two thousand were middle or small zamindars, so the expropriatory measures did not. affect many landholders. In addit ion to expropr ia t ing the larger zamindars, l and reform abolished the renta l marke t , dealt a death blow to the mortgage marke t , gave occupancy r ights to a few more of the fringe of unprotected tenants, and al lowed the tenant to make any desired i m ­provement on the land. A l l four changes could have been achieved by four amendments to exis t ing legis­la t ion at much less cost and w i t h much less social upheaval.

Strongest Case for Legislation Perhaps the strongest case for

legislative reform of the r u r a l areas can be made in the fields of f r ag ­menta t ion and subdivision of hold­ings. I t is here t h a t the organiza­t iona l s tructure of agr icul ture needs to be changed, and it is here tha t mat ters of r i g h t and t i t l e stand in the way of change, or ra ther tha t people hold t i t l e to the w r o n g plots of land. B u t the trouble is not at the level of the landlords. The f rag­menta t ion problem occurs at the level of the tenants. Changes in the possession of r ights and ti t les as between landlords, state, and tenant do not affect the actual dis­t r i bu t ion of plots. W h a t is import­ant is to change the layout of the operat ing farms. It has been ar­gued tha t change in the system of t i t les is necessary before consolida­t ion of holdings can be undertaken, but this seems doubtful since the Punjab has gone much far ther in consol idat ing holdings than UP a l ­though i ts tenancy laws are by UP standurds very backward .

Since the passage of the land re­fo rm b i l l the government has under­taken to force the consolidation of fragmented holdings. Th i s Is a l l to the good, but even w i t h consolida­t ion , holdings w i l l be too small . W h a t is needed is a movement f r o m the l and in to industry . To achieve economic size for each f o l d i n g more than six mi l l i on cu l t iva tors w i l l have to move a s taggering prospect. B u t much can be done If on ly a m i l l i o n to a m i l l i o n and a h a l f w o u l d move, provided those t h a t move are the " r i g h t " ones. The " r i g h t " ones are those w i t h holdings o f two to four acres and of more t han ten acres.

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People w i t h less t han t w o acres are rea l ly labourers w i t h garden plots, and not dependent on their land. People w i t h more than four acres can make ends meet, and even achieve economic holdings if they acquire the land of those who have left . The crisis group is made up of those holding two to four acres, wh ich is not enough land to be cu l t iva ted effi­ciently, and requires a doubl ing in size to reach efficiency. Cul t iva tors w i t h more than ten acres are efficient, but i f they move they w i l l release fa r more l and for others than depart­i ng smal l holders. I f a m i l l i o n or more of the groups w i t h two to four acres and those w i t h more than ten acres lef t the land, there wou ld be enough to b r i n g the remain ing cu l t i ­vators over the six acre m i n i m u m needed for economic efficiency. A labour d ra f t system m i g h t be avoid­ed by the use of subsidies and penal­ties.

Ratio of Capital to Men Because there were no a l ternat ive

uses for the factors of production, the m a r k e t mechanism fai led to achieve the rapid progress w h i c h was hoped for. The solution to present poverty must then *lie either in m a k i n g the market funct ion pro­perly or in subs t i tu t ing another system which w i l l increase the ra t io of capital to men. L a n d re form in UP did neither. The marke t remains, but so do the gaps between the land market and the other factor markets . Since no th ing was done to correct the basic faults of the old zamin­dar i system, there is no reason to expect tha t the new bhumidar i - s i rda r i system w i l l be any more effective In a l l ev ia t ing poverty in r u r a l UP.

Under the s t imulus of the F ive Year Plan and w i t h the development of resources under taken by the States, the lot of the cu l t iva to r should improve. I f this happens i t w i l l not be because the zaminda r i system was bad or because the new system is good, but because capi ta l resources have been developed and al ternate employments w i t h higher productivi t ies have been provided.

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