Surrey Business School

New research featured in Business Standard

This month Professor Sarmistha Pal's research is featured in Business Standard, centring on Indian historical legislation and corporate investment.

Business Standard, Why Land Ceilings Hurt Corporate Investment.

With the scarcity of land for industries and infrastructure development becoming a major economic and political issue in many densely populated emerging economies firms in India often find it difficult to purchase land, resulting in projects being delayed, relocated, or cancelled.

Professor Sarmistha Pal's research explores the legacy of the historical land ceiling legislations for land acquisition and corporate investment in India. India‚Äôs land ceiling legislations has led to land fragmentation that increased the transaction costs of buying land and the price premium firms pay when acquiring land. The extent of the problem is more in states with more fertile land as that led to more restrictive ceiling size.

It is proposed that higher transaction costs and a price premium disincentivise firms from investing in land, especially when land and capital are complements. Results using both historical state-level and recent firm-level data support the conjecture that more restrictive land ceiling size has led to lower investment in both fixed and total capital output ratios; while one cannot reverse the adverse effects of historical land reforms, options for future policy development require closer scrutiny accounting for the diversity across the states.

 

Find out more about our research here.