In the next decade, we project that India will need about eight million
hectares of land, or 2.4% of the nation's 329 million hectare land mass, for
mining, industrialization, infrastructure and urban housing, if the country is to
enjoy the 9% GDP Cagr that we forecast. To support this growth, India needs
large infrastructure spending, estimated at about US$1.2-1.5tn to 2020. This
should also drive up urbanization from 30% today to 36%, with an additional
130 million people living in cities. That's double the population of the UK or
six times that of Australia.
But land acquisition is increasingly becoming a contentious issue in rural and
urban areas due to displacement, loss of livelihood, inadequate relief and
rehabilitation, growing recognition of land value, environmental degradation
and increased awareness and sensitivity within civil society for rights of the
poor. Lack of clear ownership title, identification of the right beneficiaries, bad
and/or outdated policies and poorer governance further complicate matters.
As the demand for land has increased since the 1990s, so has the level of
corruption. Issues over land acquisition have been quickly politicised by
almost all of the political parties with an eye on electoral gains. Another
dimension of the rising corruption and cosy political-business nexus has been
the growing influence of Naxals, the left-wing extremists.
Recently proposed policy measures, changes to various laws and innovative
solutions should address some of the contentious issues, but for a smoother
process of land acquisition, the political system, as well as governance, both at
the corporate and government level, will need to improve considerably.
Do recent events signal that large projects in India will stall? We believe that
projects will progress at a slower rate than targeted and costs will increase.
The poor governance and corruption can only mean that the acceleration in
growth rates being targeted by India is at risk and investors need to be aware
of this. Stocks in sectors such as resources, metals, mining and
infrastructure, which require the acquisition of large areas of land are at risk
of adverse newsflow and inordinate delays. Ironically, most impacted would
be the nation's poor, in whose name all the battles are being fought, but
whose prospects cannot improve without strong economic growth.

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