The Economic and Social Impacts to India and Its Citizens from Inward Foreign Direct Investment


: Impact of FDI on land displacement



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9.6: Impact of FDI on land displacement


Millions of people have been displaced in India as a result of corporate investment, leaving many in a permanent state of poverty after the loss of land which is a vital aspect of economic, environmental and social valuation in India (Mathur, 2011). Any large corporate investment, including FDI projects coming to India, often requires large tracts of land. However, as Mathur (2011) states, policy makers and investors have previously ignored the ramifications of land displacement to the detriment of the people. There is increasing anger that land is being taken away from vulnerable populations such as poor farmers and tribal peoples and they are not being adequately compensated and assisted with resettlement.

Land displacement as a result of corporate investment is a very emotive issue in India today and was stressed as a negative outcome resulting from both FDI and domestic investment in nearly every interview conducted. Several respondents highlighted that land displacement was not unique to FDI but corporate investment in general. “I don’t know of a study that says because of FDI, the rate of displacement has grown” (AB).

In regards to FDI, there are two areas well known to displace people from their land: mining and Special Economic Zones (SEZs). As mentioned in Chapter Six (section 6.6.2) the government of India enacted the Special Economic Zones (SEZs) Act in 2005 (Levin, 2012). In the same vein as export processing zones (see section 3.5), the development of SEZs in the mid-2000s, was a tactic employed by the government of India to attract FDI and large scale investments, both domestic and foreign, to these tax-free enclaves which would work to promote export oriented economic growth and job creation (Levin, 2012; Mathur, 2011). SEZs require large tracts of land close to large cities with well-developed infrastructure and the land often acquired is prime farming land (Mathur, 2011). The SEZ Act helped to spark a large wave of protests against land acquisition (Mathur, 2011; Rawat et al., 2010). Many of the protests have resulted in violence between the police and protestors. The acquisition of land for private and public development purposes has occurred in India since the 1950’s, but what has ignited the current resistance to land takeover is the nature and extent of state involvement in taking the best agricultural land for private enterprise (Mathur, 2001).

CD is a Research Fellow at an applied economics research institute and she specialises in development economics. She has conducted several projects concerning FDI and inequality. She commented that the best lands are being taken from farmers. As explained in Chapter Seven (see section 7.2.) farmers are struggling to transition into other livelihoods with limited skill development and having their lands taken is exacerbating the problem:

And secondly, you are taking away land...land is either fallow or agricultural land and agricultural land is best connected to the market. So you want the land that is most connected to markets. You take away agriculture land from the people, where are they going to go? They have no skills; you have not given them any skills. It is completely unfair. And what kind of mechanism have they set in place?

A serious contention with land acquisition is that, often, it is not being done in a participatory manner. Often the government or corporate investors are only providing a one-off monetary compensation (if provided at all) for the price of the land. Several respondents stated that a percentage of the profits should be offered. GN is a Visiting Professor with a research institute concerned with issues regarding social development. He has previously worked for several UN agencies specializing in displacement and resettlement issues around the world. GN explains how sharing a percentage of the corporate profit can prove beneficial:

The people should also get the project benefits...they should get a share of the profits. We have seen that beneficiary projects in which the people get some of the profits has been done in many countries and has been very successful. And now similar things are happening in India. The government has done it...in states like Haryana and other states have done it. So it is a participatory approach and the people feel a part of the project. If you acquire land in the future you cannot just do it by law, by force...you have to treat people as partners in the project and share profits.

LN is a Senior Fellow with an organisation concerned with energy use and sustainable development. She also works with the World Economic Forum on issues concerning regulatory and governance issues that concern energy, minerals and the environment. She observes that in India, most of the mining areas are inhabited with people whose livelihood comes from the land. The fact that land dispossession is not just a loss of a piece of land with economic valuation but is also a loss of livelihood and subsistence for those occupying the land is a crucial issue at the heart of land acquisition, displacement, and resettlement. Furthermore, land has a special significance in India as it is tied to caste and class delineation as LN explains:

See here it is not like someone is owning some hectares of land. In India the situation is totally different...it is not just an asset for them...they treat land as their mother...and emotionally you are asking them to part [with it]. Land in India is not just a factor of production...it is a factor of production to the investor but it is not a factor of production to the owner. It is actually a part of their social representation...what they mean in society is actually defined by the land that they own so to part with the land becomes a big issue. So it is not just an economic valuation, not just an environmental valuation, it is also social valuation.

One of the biggest criticisms of land acquisition by respondents was that the government was using legislation from colonial times which was developed by the British to acquire land under eminent domain. Until September 2013 when a new land bill was passed into law, The Land Acquisition Act (LAA) of 1894 was the legislation used to enable the government to acquire land (Mathur, 2011). The LAA was criticized by respondents as being outdated, archaic, and a draconian law developed by the British to exploit Indian land.

However, The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 was approved by Parliament in September 2013 (Government of India, 2013). The act aims to serve as collective legislation for both the acquisition of land as well as resettlement and rehabilitation (R&R) measures for all those affected in the process of such acquisition. A salient feature of the act is the inclusion of not only land owners but others whose livelihood is dependent upon the land. Many people in India do not own land but work as labourers on the land or their livelihood is dependent upon the resources located on the land and the bill’s provisions for R&R include these groups of people as well as landowners (The Hindu, 2012). Minimum compensation for the land is double the market value for urban areas and two to four times higher for land in rural areas. The R&R package includes a monthly allowance for one year, mandatory employment for one member of the family or further monetary compensation, a replacement house, resettlement allowance, and once acre of land for landowners. The Bill also provides a stipulation that if the land is sold onwards within five years of purchase, the landowner will receive a share of the profits. Another notable feature of the act is a mandatory consent clause for private companies and PPPs. Land acquisition involving private companies must have informed consent from 80 per cent of the landowners and 70 per cent consent in the case of PPPs. There have been mixed reactions to the act from civil society and business associations with the latter stating it is too demanding and will delay projects and increase costs unreasonably. Business has also expressed concerns regarding the consent clause stating gaining 80 or 70 per cent consent will prove too difficult (Kanoria, 2012). Many from civil society have stated that the act is a big step forward in adequately compensating project affected families for the land and helping with resettlement (Biswas, 2011). However, others criticize the Bill for not going far enough (Sanhati, 2015).

In sum, land displacement is a contentious issue and one that has fuelled social tensions (Mathur, 2011) as many feel excluded and, furthermore, exploited by the economic and corporate expansion occurring in India today. Hopefully, The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 can help to compensate, resettle and rehabilitate those whose lands are taken for corporate expansion.




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