India moves to spread wealth

A $9 billion plan guarantees the country's rural poor 100 days of work per household every year.

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. "That means slower growth and less success in alleviating poverty," he says.

However, the new initiative received important financial backing from the World Bank. Paul Wolfowitz, the bank's new president, visited India last week and said that the money would help sustain the growth needed to lift 250 million people out of poverty. He pledged $3 billion in loans over the next three years to help fund rural development projects.

For this program to work, tackling corruption is key. Money from other jobs programs has routinely been siphoned off, according to research conducted by Jean Dreze, an economist from the Delhi School of Economics. His research into a pilot project that was the model for the National Rural Employment Guarantee Act found that the program guidelines, already weak to begin with, are not being enforced. His research teams attempted to review the muster rolls but found them "virtually impossible to obtain."

But corruption can be overcome, he says. "It is possible to eradicate corruption from public works programs, and this is obviously essential for the success of the act. But this depends on enforcing the transparency provisions contained in the act ... and also active public participation in the monitoring process."

If corruption can be checked, this act could dramatically reverse hunger across rural India, says Harsh Mande, a Delhi-based social activist.

India, which produces so much grain that it is a global exporter, still sees chronic hunger and malnourishment in rural households. One in every two children, Mr. Mander points out, remains malnourished, and two out of three women are anemic. Even if this act does not create self-sufficiency among poor families, it could alleviate hunger and malnourishment.

The program could also effectively stem the flow of migration from rural areas into India's already crowded cities.

Sanjay Savale, a researcher at Shivaji University at Nasik, studied one jobs program that has been running for over three decades. Though corruption marred several projects, places in rural Maharashtra have shown a downward trend in rural to urban migration. The program, he says, "has managed to break this migration cycle only because it provides work to people within two to six miles of where they live."

Mr. Savale recalls what one tribal woman said to him about Maharashtra's Employment Guarantee Program (EGP): "I never previously ate rice in the dry season. We used to eat kanyaa [a congeal with only a little food grain]. EGS employment gives us the luxury of eating rice in the dry season."

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