ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Land Regulations and Doing Business in Himachal Pradesh

A Case for Regulatory Impact Assessment

Land management has a far-reaching effect on growth, distribution of incomes, and spatial spread of economic activities. The governments, therefore, play a crucial role in establishing and supporting an ecosystem for firms by enacting laws and making rules that establish and clarify property rights, reducing the cost of disputes resolution and increasing the predictability of economic transactions. This article attempts to carry out a diagnostic analysis of land laws and practices in Himachal Pradesh and identifies the problem areas for regulatory reforms and makes a case for taking up regulatory impact assessment.

Land administration and land policy significantly determine the transactional costs associated with land transfer and using land as collateral for accessing funds. Thus, land management has far-reaching effects (Barret et al 2022) on growth due to its impact on the farm productivity and non-farm investment opportunities, distribution of incomes, as increased value addition improves returns to farmers, generates non-farm incomes, and spatial spread of economic activities (Agrawal et al 2022). Besides, land availability and comparative ease of transfer are major determining factors in cross-border movements of businesses, investment, people, employment, and other economic activities.

As such, one of the prerequisites for any investment proposal is the availability of land free from all encumbrances. Any exercise involving economic analysis of investment projects assumes three things: secure property rights through clear and enforced rules coupled with an effective mechanism of execution of contracts; appropriate legal environment to create an entity separate from the owner to implement contracts for distribution of risks and pay-offs; and a sound public economic mechanism of taxes, subsidies and public investment for creation and maintenance of public goods. Additionally, tax competition, environmental regulations, cross-border spillovers of information, and public goods benefits also influence decisions on the location of businesses across territories (Carruthers and Lamboreaux 2016; Agrawal et al 2022). A consequence of all this is capital mobility, which generates regulatory competitions with state governments outwitting each other in offering sops to woo investors, leading to a “race to the bottom” (Carruthers and Lamboreaux 2016).

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Updated On : 29th May, 2023
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