An election, particularly a federal one, is rarely a referendum on a single issue. Nevertheless, the 2009 Lok Sabha polls in West Bengal in general and at least in the Hooghly constituency?to which Singur was recently added?in particular, was largely about the acquisition of agricultural land for industrial projects. The Left has already conceded as much. In its first post-poll meet, Budhhadeb Bhattacharya has practically withdrawn all land acquisition plans in the next two years, including the City Center project at Kharagpur.
The press is today agog with stories of the fall of the red citadel in West Bengal. Hooghly, a red bastion for three decades, was one of the major blows. In 2004, people were writing the epitaph of Mamata whose party had won only one seat, hers, with the same conviction. What changed in the last five years? The Singur and Nandigram issues doubtless made this election a major showdown on the debate on land acquisition.
For some, this verdict has raised more questions than it has settled. Here is why. The state government acquired land at Singur with compensation above market rates. The faith in markets of simple economics suggests this is a windfall for farmers that they should relocate without murmur. Then comes the counter that this is not so clear since after the transformation of agricultural land to industry the value of neighbouring land would shoot up at least ten times, hence the compensation is unfair. Clearly, farmers have something to lose, which is probably why, as I had argued in a previous column, the spot chosen is located in a Trinamool constituency. In any case, a struggle begins and Mamata finds her much-needed issue. To her credit, she leads the struggle with amazing doggedness and ferocity and ultimately a sulking Ratan Tata packs off the project to Gujarat. According to simple economics again, everyone loses. Singur stays agricultural, despite all the podium-thumping of Budhhababu and his industry minister. The unwilling farmers have not got their land back and many of the locals who had taken to professions and businesses based on the coming of the Nano factory were left in the lurch. Whom to blame but Mamata? The Left Front is quick to dub her ?anti-development?. It is this setting that makes the Trinamool victory here most significant.
It is equally important to note that on the Singur issue, Mamata had the support of practically no one from the intelligentsia. Almost all major economists and commentators had pointed out?politically correct riders about consensus-building, democracy and education notwithstanding?that the Left was indeed on the right in this issue. So, why this verdict by the victims of the situation?
A few alternative explanations are possible. The first would be that of denial. The poll results were a consequence of the Congress-Trinamool alliance rather than anything to do with policy. The percentage of votes polled by the Left?the Left?s share of votes in the state as a whole fell by close to 8%?tells a different story, as does the Left?s own interpretation signified by its scrapping of all future land acquisition plans.
The next is that the people of Singur, and Bengal in general, do not know what is in their own interest. Possible, but this violates one of the core postulates of economics, that decision makers are rational. Given the amount of press and the debate the Singur issue generated, to claim that people cannot realise what is in their self-interest is nothing but being smug.
So, if we are to believe that at least in part the results should be read as a referendum on Singur by a rational, informed populace, we are really left with only one sobering explanation?that we really do not understand the real socioeconomic implications of conversion of agricultural land to industrial use.
The issue is of import well beyond just one constituency, one state or even one Lok Sabha election. It is about a cost-benefit tradeoff that policy makers need to understand if they truly hold the public good in their mind. Given the consensus in favour of shifting the population away from agriculture, there is a real danger of taking too much land away from it. In states where land reforms have not been effective, major projects?SEZ or otherwise?routinely spawn multi-hundred-crore land deal bonanzas. After adjusting for transaction costs, there is no reason why this should not be true where land reforms have done better. But as Singur has shown, the benefits of landholding are distinctly different for small landholders vis-?-vis landlords. Economists can ignore this political lesson of Singur only at their own peril?and that of the nation.
The author teaches finance at the Indian School of Business, Hyderabad