India shares the wealth with its poor

Anuj Chopra

• Last Updated: November 07. 2009 4:03PM UAE / November 7. 2009 12:03PM GMT

Indian anti-poverty programmes are going ahead in spite of budgetary constraints. Rupert de Chowdhuri / Reuters

PUNE // The Indian government is gearing up to expand spending on its flagship anti-poverty programme despite concerns about its yawning fiscal deficit.

The government plans to spend 390 billion rupees (Dh30.55bn) this year on the National Rural Employment Guarantee Act (NREGA), a scheme launched in 2006 that guarantees the country’s rural poor 100 days of paid employment a year. The increased spending marks a 144 per cent increase compared with last year’s budget.

The move is widely being seen as an effort to spread more widely the spoils of the country’s galloping economic growth. Much of rural India, home to two thirds of the population, has been largely bypassed by India’s recent high-tech economic boom. The scheme aims to reduce the dependence of the rural poor on agriculture, which is largely reliant on the vagaries of the Indian monsoon.

“We cannot fail the poor of our country particularly at a time when resources are available to provide gainful livelihood security for at least 100 days to the rural poor,” Manmohan Singh, the prime minister, said in September, referring to the increased budgetary allocation for NREGA. “We have to redouble our efforts to mitigate rural distress.”

The increased budget will be primarily used to increase the average wage paid under NREGA to 87 rupees a day, from 65 rupees a day in 2006.

But critics question whether India can afford such an expansion in public spending, especially as its fiscal deficit swells to a record 6.8 per cent of GDP this year. The government is spending heavily on stimulus and aid packages to insulate itself from the global financial crisis and the shocks of the worst drought in the country in 37 years.

The government’s revenue totalled 6.1 trillion rupees after direct tax revenue increased by a paltry 3.9 per cent from April to last month, while expenditure was 10.2tn rupees in the same period.

The government is working on shrinking its fiscal deficit to 5.5 per cent by next year, but in order to finance its cash-hungry social schemes such as NREGA, it plans to borrow a record 4.51tn rupees and also sell stakes in profitable state-run companies until March 31, 2012, the home minister P Chidambaram said last week.

“Given the tight fiscal situation and the need to fund social-sector programmes, a special dispensation is being made.”

The growing popularity of NREGA, which was launched after nearly two decades of sustained focus on privatisation and the high-tech sector, has helped the Singh-led United Progressive Alliance reap sharp electoral gains. In May, the UPA was elected to a second consecutive term, in a large part because of NREGA, analysts say.

But critics question the effectiveness of the social scheme given it is marred by corruption. Across several Indian states, money from the jobs programmes has been routinely embezzled by officials.

Even though NREGA guarantees 100 days of employment, the national average of working days provided to rural households was less than half that. Only 14.48 per cent of participating 45 million rural families received the full 100 days of work.

To stem corruption and ensure effective implementation of NREGA, CP Joshi, the rural development minister, plans to appoint ombudsmen in districts to make social audits under the scheme as transparent as possible.



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