Yes, you are right, we've even lesser amount of land per person as compared to US. And hence we've to allocate it more judiciously.
You can't give away fertile land to industrialization. There is plenty of barren land which can be given to industries.
As for the compensation, govt has to side the land-owners as they are less organized (and hence a weaker party with a risk of being bullied) as compared to the industrial behemoths.
