Challenge of India’s huge job scheme
The Indian economy is growing at an impressive eight per cent clip and stock markets are booming like never before. But there are fears that the country could get bogged down in an ambitious employment guarantee programme.
With the country’s social and physical infrastructure creaking, finance minister Palaniappan Chidambaram must find the resources for what has been described as the world’s biggest social security initiative, announced last year. On Tuesday, Chidambaram will present the third budget of the Congress party-led, centre-left United Progressive Alliance (UPA), at a time when GDP is slated to grow by eight per cent.
This would be the second time in the six-decade-long history of independent India that the economy has shown a growth of over seven per cent.
“The main challenge before the finance minister is to reduce the budget to an annual statement of income and expenditure of the government that is shorn of hype and without efforts to push through economic reforms,” says Bibek Debroy, secretary general of the industry association, the PHD Chamber of Commerce.
Economist Saumitra Chaudhuri, member of the prime minister’s economic advisory council, said that “the primary challenge before the finance minister is to carve out a budget that supports the climate of economic growth while sticking to the path of fiscal consolidation”. Even if GDP is growing rapidly, the economy continues to encounter major structural weaknesses: electricity generation is not keeping pace with the overall growth of the economy, ballooning oil imports are fuelling inflation, roads are potholed and non-existent in many rural areas, ports and airports are clogged, while banks and financial institutions lend mainly to the affluent elite. While the services sector and manufacturing industry have expanded rapidly, the growth rate of the agricultural sector has been a tardy at 3-4 per cent a year recently.
Chidambaram wants to initiate market-friendly policy measures. But he is constrained by the fact that the ruling coalition is dependent for survival on the outside support of communist parties. The communists have resisted efforts at privatising profit-making public sector enterprises and the UPA government has acceded to their wishes.
Communist supporters are urging the government to abide by a common minimum programme drawn up in June 2004 that seeks to increase official spending on the social sector and address long-standing problems of poverty and unemployment. Says economist Kamal Nayan Kabra: “Because of structural distortions, the high GDP growth has not been able to reduce poverty and inequality.” He describes the growth of India’s services sector as “unnatural, unwarranted and undesirable” since it has been at the cost of agriculture and higher production of ‘wage goods.’
Ex-professor at the Indian Institute of Public Administration, Kabra apprehends that the employment guarantee program-me may merely lead to higher nominal incomes in the hands of farmers: “Without commensurate increase in the production of wage goods, inflation may neutralise the higher incomes or even make the rural poor worse off,” he said. When Chidambaram presented the last annual budget, he emphasised that he was interested in “outcomes” rather than financial “outlays”. That challenge remains. — IPS