Sunday, 27 November 2016

Demonetization Woes (2)

 (via Sunny Narang)

I was speaking with a rural artisan friend from Rajasthan .

He told me that the market price for prime agricultural land is about Rs. 1.6 crore an acre (on the main road) while registration is at less than Rs. 10 lacs an acre . The land is about 40-50 kms from Jaipur towards Bikaner .

So the "white-price" of the land is about 6-7% of the actual market price .

The market-price in black will now come down rapidly as rural agricultural land is the main cash-sink in India of black-money for politicians, bureaucrats , land-mafias , financiers .

The main achievement of demonetisation for rural India will be to bring down artificially inflated land prices , which make no sense for any farmer to buy or for any industrial activity.

Per acre income from agriculture in India ranges from about Rs.30,000-Rs 1 lac per year from 1 acre of land . If one was looking at even a 5% return the land price should be between Rs.6-20 lacs an acre .

The price of land is about this much in agricultural zones far from any big city or logistical centre .
So agricultural land around a regional capital or a decent sized town/city , 50-100 kms radius is where most black-money is parked .

This demonetisation will reduce this premium hugely , helping Industries and Corporate Farming to get better deals . Even farmers who want to expand their holdings .

The power over surplus land will pass from local political, criminal and financial elites to national and global elites or local farming families who have liquidity .

What it will achieve is land-consolidation in agriculture .

That is my call.

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