The policy of 'land to the tiller' is based on the idea that:

Ownership of land provides incentives for increased output.

The correct answer is option 3: Ownership of land provides incentives for increased output.

This policy aims to transfer land ownership to those who actually work on it (the tillers), thereby giving them a stake in the land. The policy of ‘land to the tiller’ is based on the idea that the cultivators will take more interest — they will have more incentive — in increasing output if they are the owners of the land. This is because ownership of land enables the tiller to make profit from the increased output.