India Moves to Spread Wealth ; A $9 Billion Plan Guarantees the Country's Rural Poor 100 Days of Work per Household Every Year

By Anuj Chopra Contributor to The Christian Science Monitor | The Christian Science Monitor, August 25, 2005 | Go to article overview

India Moves to Spread Wealth ; A $9 Billion Plan Guarantees the Country's Rural Poor 100 Days of Work per Household Every Year


Anuj Chopra Contributor to The Christian Science Monitor, The Christian Science Monitor


India passed its most ambitious antipoverty program in decades Tuesday in an effort to spread more widely the spoils of the country's rapid economic growth.

Social welfare spending, it seems, is staging a comeback here, after 15 years of focus on privatization and encouraging the high- tech sector. Presenting the bill in parliament, Congress Party President Sonia Gandhi said, "An economy growing at 7 percent per year, can and must find the resources ... to improve the lives of its millions of poor."

Much of rural India, home to two-thirds of the population, has not felt the benefits of the new high-tech economy, and voters in these areas handed the reins of power to the Congress Party in a stunning election upset last year.

The new National Rural Employment Guarantee Act is widely seen as political payback.

Under the new legislation, rural poor are guaranteed 100 days of work per household every year. One-third of these jobs will be reserved for women. The mammoth program, which will be implemented in the 150 poorest districts over the next four years, comes with a whopping price tag of $9 billion a year.

The new jobs include construction of roads and embankments, cleaning up polluted water supplies, and wasteland restoration for agriculture, among other rural improvement efforts.

Ila Patnaik, business editor of The Indian Express, says this employment guarantee act has the potential of becoming India's best antipoverty program - if implemented well. "Out of all the myriad subsidy programs that exist in India at the moment, a much higher proportion of the total taxpayers' money spent by the government can reach the targeted - the poor."

But some experts say the program will probably not result in self- sufficiency among the poor with the paltry daily wage of little more than a dollar a day, and no sustained vocation. Critics also question whether India can afford such an expansion in public spending.

"Fighting poverty is not a matter of good intentions, it's about good policies," argues Jagdish Bhagwati, a professor of Indian Political Economy at Columbia University. "The socialists in the government and its communist allies are holding up privatization of public enterprises, and ... they're diverting scarce funds into this employment program that has led to little productive investment in the past."

The government's rural spending budget for this year has already amounted to $2.6 billion, a significant 33 percent jump over last year. The additional $9 billion in public spending comes at a time when India's fiscal deficits are already hefty, says Arvind Panagariya, an economics professor at Columbia University. The jobs program, he says, will divert funds away from developing infrastructure to support India's growing economy.

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