Research Note SOCIO - ECONOMIC INDUCEMENTS IN LAND MARKET : CASE STUDY OF UTTAR PRADESH STATE IN INDIA. Gyanendra Mani V.K. Pandey.

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1 Bangladesh J. Agric. Econs. XXI, 1 & 2 (1998): Research Note SOCIO - ECONOMIC INDUCEMENTS IN LAND MARKET : CASE STUDY OF UTTAR PRADESH STATE IN INDIA Gyanendra Mani V.K. Pandey. ABSTRACT The sale as well as lease transactions of agricultural land affect both the distributional and production pattern which have serious policy consequences in a developing economy. The study, using the qualitative analytical methods of logit function, identified the socio-economic characters which influenced the land sale or lease decisions of farmers in a highly fertile and developed region of India. The study found that with an increase in the size of holding, the farmers showed greater probability to (i) buy more land in the sale market, and (ii) lease-out land in the lease market. The former tendency leads to dispossession of small holders and, consequently, adverse effects on distribution of land and production of subsistence crops needed for the growing population, while the latter tendency offsets these adverse effects through favourable redistribution atleast of the operated area as generally small holders lease-in land in the region to optimise their family labour and financial resources. Among the other variables, the increase in age and addiction to drugs or gambling in family are found to be raising the probability of being a seller or lessor. It is argued that leasing of agricultural land be accorded fully recognised legal status with some regulatory controls. I. INTRODUCTION In a developing country like India, facing an ever increasing pressure on her agricultural production due to population rise as well as economic development, both the sale and lease transactions in market for agricultural land are to be viewed with serious policy consequences. Such transactions may significantly affect the production and distribution patterns in agricultural sector. Some recent studies done in India (Shergill, 1985 & 1990; Chatha, 1986; Birthal and Singh, 1991; Kumar, 1991; Singh et al., 1991) have found that socio-economic conditions of farmers largely influence their decisions regarding sale or lease of land. The regional diversities in agro-climatic factors, land use and socio-economic conditions through the heterogeneous vastness of the country, may prohibit any generalisation on land market behaviour (Krishnaji, 1991). Yet the recent spurt in land sale and lease transactions in the country calls for regional studies on such transactions, which may help in guiding desirable reorientations in land refroms and regulations on a regional basis. Agriculture in any case, is a state subject in the country. The authors are respectively Agricultural Economist. National Bank for Agriculture and Rural Development (NABARD), Bhubaneswar Regional Office, India and Professor, Department of Agricultural Economics, College of Agriculture. G.B.P.U. A & T. Pantnagar, Nainital, Uttar Pradesh, India. The views expressed in this article are of the authors and do not necessarily reflect the views of the organisations they belong to. The Authors are grateful to anonymous referees for their valuable comments on the manuscript.

2 60 The Bangladesh Journal of Agricultural Economics However, one methodological problem arising in this context is that the acts of sale and purchase or leasing-out and leasing-in are qualitative characteristics of yes/no type, rendering use of conventional quantitative methods like regression which may not be very suitable for study of impact of socio-economic conditions on sale or lease decisions. This study attempted to measure the impact of socio-economic factors on land sale or lease decisions by applying an appropriate qualitative analytical method. II. STUDY AREA Uttar Pradesh is the most populous and the fourth largest state covering a large tract of the most fertile Indo-Gangetic Plains in the North of the country. The western region of the state is its highly developed region both agriculturally and industrially, with very high productivity and percapita income. Meerut district of the western of the state was selected for the study for its being representative of both agricultural as well as industrial development in the region. The district has achieved cent percent rural electrification, about 98 per cent of its net sown area is irrigated, fertiliser consumption ( Kg per ha.) as well as the cropping intensity ( per cent) are much higher than the state average (respectively being Kgs per ha and per cent) during the year when the study was planned. The district also has a relatively high degree of concentration of small scale industries with some medium size industries as well. But the average size of holding in the district (1.18 ha) is some what smaller than the national average (1.69 ha) but little higher than the state average (0.93 ha). The degree of urbanisation is also higher in the district (37 per cent ubran population) than the state average (20 per cent urban population). III. SAMPLING DESIGN AND DATA A two-stage stratified random sampling design was adopted for collection of primary data relating to land sale and lease transactions for farmers in the region. The district of Meerut is divided into four tehsils (revenue collection divisions). For the study purpose, all the four tehsils of the district were selected constituting the first strata. From each of all the four tehsils, a simple random sample of 10 patwari circles (reveme and land record circles) was drown coustituting the second strata. From each of the ten selected Patwari circles (total 40 Patwari circles from 4 tehsils), a simple random sample of 10 cases of land sale (i.e., 10 sellers and their 10 respective buyers) and 6 cases of land lease (i.e., 6 lessors and their 6 respective lessees) transactions made during the 1991 was obtained. Each sale case consisted of one seller and the respective buyer and each lease case consisted of one lessor and the respective lessee. Thus, the total sample comprised 400 sellers (10 sellers x 10 Patwari circles x 4 tehsils) and 400 buyers (10 buyers x 10 Patwari circles x 4 tehsils) for land sale market and 240 lessors (6 lessors x 10 Patwari circles x 4 tehsils) and 240

3 Socio-Economic Inducements in Land Market : Main and Pmtdey 61 lessess (6 lessees x 10 Patwari circles x 4 tehsils) for land lease market. The sale transactions were larger than the lease transactions and, hence, the larger sample for sales. IV. HYPOTHESIZATION OF SOCIO-ECONOMIC CHARACTERS The following set of variables were hypothesised to be affecting the sale/lease decisions of participants in the land market: Size of Holding Measured in hectares, this variable represents the total land stock available on the supply side, out of which the sale is offered, hence bearing a positive relation with the sale decision. Also, the toal land stock available with an individual represents the buying capacity in form of secured asset base, on the demand side, hence, bearing a positive relation with purchase decision. In the lease market, however, usually the landless and small landholders lease-in land for their subsistence. But, in case of large holders of land, any situation may prevail, i.e., leasing -out due to management problems or leasing-in to optimise use of family labour and machine power. Thus, no a-priori hypothesization is possible with respect to increase in size of holding on the probability of leasing-out or leasing-ii Education of the Family Head This characteristics is measured through the following scale Illiterate = 0,Up to primary = 1; Up to Middle = 2; Up to high school (10th standard) = 3; Up to intermediate (12th standard) = 4; Graduate amd above = 5. It is generally assumed that, with the increase in education, a farmer becomes more progressive in technology adoption and make a profitable farming provided he is staying in farming business. However, it is common observation that an increase in education provides better job opportunities elsewhere and usually creates a distraction from the hard farming conditions. Hence, the variable is assumed to have a positive bearing on the probability of a farmer being a seller or lessor. Age of the Family Head This characteristics is measured in years. With an increase in age, there may be greater preference for security through land. On the other land, at older age, farmers may find it difficulty to self-cultivate or manage the land and hence, may opt to sell or leaseout. Therefore, while an increase in age is hypothesised to increase the probability of being lessor, it may positively influence both the decisions to sell or purchase land.

4 62 The Bangladesh Journal of Agricultural Economics Occupation of the Family Head This characteristics is used in dummy form with absentee owner =1 and peasant owner=0. It is hypothesized that the absentee owners usually prefer to sell or lease out their land on account of the problems related to the management and supervision. Shergill (1990) in his study on land market in Punjab concluded that the land market transactions seemed to be resulting in a net transfer of land from non-cultivating owners to cultivating owners and also producing a mild centripetal tendency in the distribution of land amongst the cultivating owners. Land in the Family Per-Capita Measured in heactare, this characteristic shows the actual availability of owned land per person to support the family members. The hypothesization regarding impact of this characteristics on sale/lease decision of farmers is the same as that for the size of holdinc,. Family Size It is hypothesized that as the family size (no. of persons) increases, the food demand of the family also increases which induces a farmer to purchase or lease in additional land. Family Labour Availability This variable is measured in terms of adult equivalent family labour force actually participating in crop production. As the number of family labour increases, the cultivator would like employ it in farming so as to maximise the farm income which induces the cultivator to purchase or lease the additional land. Hence, this variable also reduces the probability of being a seller or lessor. Percent of Family Member Engaged in Non-Farm Business With an increase in the level of this characteristics, the problems of supervision and management of owned land are expeeted to increase which may increase the probability of being a seller or lessor. Years of Family Headship Measured by the number of years for which a farmer has acted as the head of family, this characteristics represents the maturity of thought affecting both land sale or purchase decisions. Some earlier studies (e. g., Shergill, etc.) have shown the importance of this variable in the growth or decay of farm, hence, included in the model. however, no a-priori hypothesization can be made about the impact of the characteristics on the probability of being a seller.

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10 68 The Bangladesh Journal of Agricultural Economics From these results, it is evident that an increase in the levels of the variable of size of holding. education of the head, age of the head and the addiction level in the family are found to significantly increase the probability of an individual being a lessor, and an increase in the levels of the variables of family labour size and crop loan borrowing are found to decrease significantly the probability of being lessor. The sign of the variable of size of holding in the lease market turned out to be the opposite to that in the sale market. An increase in the level of this characteristics favoured acquisition of additional land in sale market in contrast to lease market where an increase in the level of this characteristics favoured disposing of owned holding though on a temporary basis through lease. In fact, the operating motives are different in the two cases of sale and lease markets. Owning more land provides incrased buying capacity as will as higher socio-economic status. Therefore, an increase in size of holding raises the probability of being a buyer. But it also provides a more assured support base to family with increased preference to luxuries and status over tilling of land. Hence, an increase in size of holding raises the probability of being a lessor. Simialrly, an increase in education level also raises social status with reduced preference for mental works and, hence, raises the probability of being a lessor. The increase in age and addiction level in family creates problems of supervision and management of land and loss of interest in farming, thereby, raising the probability of being a lessor. On the other hand, both the characters of family size and crop loan borrowing affect the resource base of farmers by way of availability of family labour and finance. An increase in family labour and finances leads to the problem of resource use optimisation which necessitates leasing-in of land. Hence, an increase in family size and crop loan borrowing raises the probability of being a lessee. VI. CONCLUSIONS The caracter of size of holding has been of special policy significance to the country in view of her egalitarian aims and imposition of an upper ceiling on agricultural land holdings. The results of the study show that, with an increase in size of holding, the farmers of the region have tendency to buy more land and, conversely, the probability of being a seller increases with a decrease in size of holding. This indicates of dispossession of small holders. The old age and addiction are found to be influencing the decision to sell land. This dispossession of small holders has distributional consequences leading to rise in inequalities. This is also likely to cause some shifts in production pattern in the region from subsistence crops to commercial crops more favoured by large holders of land. Also, these transactions are likely to increase fragmentation of land holdings and the consequent need for high cost and time consuming work of consolidation of agricultural holding. In lease market, on the other hand, a larger in size of holding raises the probability of being a lessor and, coversely, a smaller holding raises the probability of being a lessee. This tendency is

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