Land ownership and rural inequality

Land ownership and rural inequality

By Naveeda Mahmood

RURAL poverty is rooted in the asymmetrical distribution of land, which is the main asset in an agricultural economy.

Big landlords have been reaping the benefits of price policies while small landholders are only growing the staples, to put food on their tables.

Disparities between rich landlords and poor peasants in terms of wealth, rents from land, capacity to grow cash crops and ability to obtain education remains stark. Land ownership is highly concentrated and feudal lords are obstructing any meaningful reforms towards fairer distribution of land. What is there in our rural areas is a perpetual deprivation of the majority and a huge income inequality.

Huge income disparities serve as a drag on the economic growth and poverty reduction. Scarce resources get diverted to eliminating poverty instead of focusing on reducing income disparities. Concentration of incomes in a few hands generates undesirable socio-economic consequences.

Nowhere is this strain between growth and growing inequality more relevant than in the agriculture where distribution of resources has long been viewed to be skewed. Most of the rural poor, on an average, hold less than five acres only enough to sustain and survive or work as share cropper and remain at the mercy of the tenancy arrangements with the land owners.

Ownership holdings by size of area owned, according to the agriculture census 2000, shows that in Pakistan 61 per cent of the total private holdings are under five acres and ownership of 50 acres and above are only two per cent. Majority of the landholdings, 94 per cent, are in the category of less than 25 acres while only six per cent holdings are in the category of 25 acres and above.

There are wide provincial variations as, in Punjab and NWFP, dominant ownership holdings fall in the category of under five acres, 61.34 per cent and 79 per cent respectively while in Sindh and Balochistan, majority of the land ownership is in the size class of five acres to under 25 acres, 46 per cent and 52 per cent respectively. In Sindh and Balochistan, shares of landholdings of 25 acres and above are the highest among all four provinces, 12 per cent and 18.6 per cent respectively.

Since majority of land holdings are of less than five acres, the income patterns of households owning them, become highly vulnerable to the vagaries of weather and economic shocks — any exogenous shock, unfavorable weather conditions, a bad crop or an adverse economic policy, proves their undoing and they slip below the poverty line. A vicious cycle of poverty ensures — starting with lower or rather zero initial assets’ base — that the small farmers are unable to bridge the economic gap on their own unless official economic policies are positively biased towards them.

Agricultural income for majority of the rural poor accrues from the food crops, mainly rice and wheat. Wheat dominates the total cropped area occupying 40 per cent of the total area, followed by cotton and rice, 14 per cent and 12 per cent respectively. Share of sugarcane is only four per cent of the total cropped area (agricultural census 2000). These two food crops serve as the staples for majority of the households.

The decision to grow food or more remunerative cash crops such as sugarcane depend on the size of land holding and restrict the freedom of choice for the poorer. To be able to profit from the price policies set by the government for sugarcane, it is vital to have large land holdings to serve as insurance against food scarcity for such agricultural families. Rural poor prefer, rather can only afford to grow more of food crops to feed themselves. Well-off households with large farm holdings receive major part of their income from cash crops while poorer households get their income primarily from food crops.

Cash crop such as sugarcane needs to stay in the ground for whole year and families dependant on land for food cannot afford to wait that long for any economic return. Rotation of crop with another food crop in the same year is not possible and the soil has to wait for three or four years to grow food crops. If the small landholders have larger tracts of land, it would become feasible for them to simultaneously grow both food crops for survival and sugarcane for income enhancement. No wonder that the wealthier agricultural households in the higher income bracket dominate cultivation of profitable cash crops.

Shares of various income sources in rural monthly household income for 1998-99 and 2005-06 amply show that dominant part of the rural income comes from crop production followed closely by wages and salaries including government jobs and unskilled labour. Over a period of eight years, the pattern of distribution of household income has only nominally changed. In NWFP and Balochistan, income from wages and salaries contributes a major share to total income while crop production is the main contributor in Punjab and Sindh.

Rental income from land only accrues to the big farmers while majority of rural population working as tenant farmers or having very small tracts of land are on the losing side. Overall rental income from property forms a meagre share except in Sindh and NWFP where there has been substantial rise in the contribution from rental income since 1998-99. Livestock has now emerged as a prominent source of income, improving its share since 1998-99 except in Punjab where its share has considerably declined.

Given the importance of wages and salaries in all the four provinces, employment assumes crucial importance keeping in view the skewed land ownership. Focus on raising employment can help reduce rural income inequality. Currently, the poor and uneducated are unable to invest in education which could enable them to secure government jobs.

Policies with a pronounced bias in favour of facilitating non-farm income such as improving human capital or labour skills by providing free and quality education, would help correct the skewed income patterns and reduce the rural poverty in the absence of any structural change in the asset base. Measures to improve sources of income such as livestock will undoubtedly reduce inequality.

Programmes aimed at poverty reduction failing to address the issue of skewed land distribution, will be inadequate. Any land reforms, no doubt, would face stiff resistance by the land owning class, enjoying enormous political clout.

Rich land owners are few but effective as a pressure group. On the other hand, the peasants are not organised as an interest group.

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