Reforming Agricultural Land Conversion Laws in States

Abstract: Land is central to structural transformation, yet in India it remains constrained by regulatory regimes that prevent it from shifting to higher-valued uses. Although agriculture’s share of output has fallen sharply, nearly half the workforce remains in low-productivity farming, reflecting persistent spatial misallocation. This paper examines agricultural land-use conversion laws across 20 Indian states and documents the scale and complexity of the regulatory barriers governing conversion from agricultural to non-agricultural use. Using a comparative institutional analysis, we show that conversion is subject to a stacked, serial approval regime involving multiple statutes, authorities, and veto points, imposing high transaction costs without clear economic justification. We assess the impact of easing these constraints using a close-border difference- in-differences design comparing districts in Telangana and Andhra Pradesh. We find that institutional reforms accelerating land conversion are associated with significantly faster growth in built-up area, with Telangana converting land at roughly 1.3 times the pace of comparable Andhra Pradesh districts. We conclude by analyzing Andhra Pradesh’s 2025 repeal of its conversion law and argue that meaningful reform requires outright repeal rather than incremental simplification.

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