The Union Budget for 2026-27 doesn’t leave much to be desired for taxpayers given the major reliefs and rationalisation of taxation policies over the last few years. At some point, tax policies must show a certain stability, and be more compatible with widely accepted global principles.
The government’s unwavering commitment to fiscal consolidation, transparency, and improving the quality of spending is also amply clear and demonstrated. So the coming Budget will be watched more from the perspective of whether it will be used as a vehicle to unleash another set of policies aimed at reinvigorating the economy, and raising its productive capacity/potential growth rate.
Among the various suggestions for the Budget from a group of economists who met the finance minister earlier this week, the most predictable and unobjectionable was the one about giving another solid push to the manufacturing industry, which is facing fresh, daunting challenges in this protectionist, disorderly phase of global trade.
The call for a revamping of the production-linked incentives (PLIs), by broadening the beneficiary pool, and via increased focus on value addition and import substitution, is eminently sensible. The PLI policy has at best worked only in a few sectors, and largely served as a spur for “production”, in the narrow sense of import-dependent assembling.
However, what stood out among the economists’ prescriptions was a potentially contentious proposal to introduce a “vacant-land tax” to encourage property owners to repurpose idle plots for industrial infrastructure. According to its proponents, such an impost would unlock land for factories, logistics hubs, and innovation parks, fuelling job creation.
India’s land policy, through the British era and post-Independence, has recognised the 17th-century doctrine of “Eminent Domain”, which accords precedence to public necessity over the private. While right to property was originally a fundamental right under the Constitution, it was later converted to only a legal right, giving greater leeway for the state to acquire land for “public purpose”.
The arbitrariness of the land acquisition policy was addressed to a large extent with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. It made rehabilitation and resettlement of displaced people a legal obligation of the government, in addition to amplifying the compensation with the “fairness” attribute defined.
The provision of “social impact assessment” was a salient feature of the Act, and a safeguard, even as the rights of capital have assumed a definite upper hand. However, though the Act has helped ease and speed up land aggregation for the purposes of infrastructure and urbanisation, it couldn’t put a check on peremptory acquisition of vast tracts of farmlands, and rent-seeking by those who have access to large capital and political connections.
Even well-intentioned policies like the Special Economic Zones have turned to aid land squatting, and profiteering on real estate. The key objective of boosting value creation through “economies of scale” has been given a short shrift. Attempts to unlock government land (as with the defence department, the railways, and port trusts) haven’t been sufficiently effective either.
At the same time, fragmented farmlands continue to be a bane for agriculture productivity, though recent attempts to digitise land records have brought an element of certainty to land titles. Keeping land parcels acquired for “public purpose” idle amounts to defeating that very purpose. It breeds inequity. A tax on land squatting would help only if it is carefully targeted and designed to be a sufficient deterrent.
