CII Proposes Land Reforms to Boost Manufacturing Investment

The proposed reforms aim to fix the inefficiencies that raise capital costs and lower investor confidence. These issues are major roadblocks to India's goal of becoming a global manufacturing center. The CII's plan seeks to turn industrial land into a reliable and transparent asset, vital for achieving national manufacturing goals.

How Land Problems Hurt Investment

India's system for acquiring and managing industrial land is tangled by unclear ownership, long delays in gaining possession, and complex rules. These problems not only slow down projects but also significantly raise the cost of capital. This hits Micro, Small, and Medium Enterprises (MSMEs) and new "greenfield" projects particularly hard. Such friction erodes investor confidence, making the operating environment seem riskier and less predictable. The CII points out these issues across the entire land process, from searching for sites to final use, as key obstacles for manufacturing growth plans like 'Make in India'.

India Lags Rivals in Land Management Efficiency

Although India attracted substantial FDI, with USD 81.04 billion in FY 2024-25, its land management for industry is less competitive than in countries like Vietnam and Thailand. Vietnam, for example, offers competitive tariffs and simpler processes for foreign land use, while Thailand provides stability and efficiency. India scores lower on regulatory quality and ease of access to land compared to these neighbors. Old land ceiling laws may also have increased acquisition costs. While India's Ease of Doing Business ranking improved significantly, regulatory hurdles, high costs, and infrastructure gaps still limit manufacturing competitiveness. The government is working to improve this by digitizing land banks and integrating GIS with the India Industrial Land Bank. FDI in manufacturing itself grew 18% to USD 19.04 billion in FY 2024-25, supported by schemes like Production-Linked Incentive (PLI). However, inconsistent state rules and policy gaps slow down expansion.

Challenges Remain for Reform

Implementing these CII recommendations faces major hurdles. A key challenge is uniting land governance, which is mainly handled by individual states, under one national system. Previous land reform efforts met resistance and delays, and a national council for land issues might face similar coordination problems between states. The focus on "ease of doing business" can overlook deeper issues. India still lags in areas like property registration and contract enforcement compared to some competitors. Vietnam, for instance, benefits from greater political stability and simpler land rules for foreign companies. India's complex bureaucracy and unclear compliance rules continue to deter investors. Additionally, many inefficient companies remain stuck due to high exit barriers and strict labor laws, tying up resources. Some analysts note that while India has growth potential, its market access and valuations can be less attractive than those in other countries.

Outlook for Investment and Growth

If these reforms are successfully adopted and coordinated across states, they could drastically cut project times and costs, improving land use. This would significantly strengthen India's position as a global manufacturing hub. A national land bank linked with GIS and a digital single-window system are essential for a more predictable investment climate. Such improvements could attract significant domestic and foreign investment, especially in areas like electronics and advanced manufacturing, supporting trends like 'friend-shoring'. Analysts like Morgan Stanley are optimistic about India's long-term growth, drawing parallels to the 1980s US economy. The push for reforms aligns with attracting private capital, with many investors showing positive sentiment towards India's private markets, though concerns over access and valuations remain.