The Indian rural economic structure has been undergoing changes. One aspect of this is the growth of households who own land but do not cultivate it themselves. An implication of this is the potential for tenancy acquiring increasing importance in the rural sector. This study uses data from nine villages in Andhra Pradesh to present the relative significance of these households and analyse the resource adjustment process in the land lease market. The presence of non-cultivating peasant households in rural areas and tenancy contracts becoming the dominant institution for resource adjustment can act as a shackle on agricultural growth and development of the economy.