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India's rural job plan may cost $6 B
By agencies
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Friday, 12 August 2005, 19:30 IST
NEW DELHI: India's plan to offer 100 days of employment a year to every rural household may cost the government nearly $6 billion a year, the Rural Development Minister said on Friday.
The plan has drawn fire from economists who say it has the potential to widen the large fiscal deficit, push up interest rates and hurt the bond market if it becomes law.
Raghuvansh Prasad Singh said according to government estimates about 25 million rural households are likely to join the scheme, for which the center-left coalition government is likely to introduce legislation in parliament next week.
"Funds will not be a problem. We will arrange the money," Singh told reporters after a cabinet meeting on the issue. "Those who are saying where the money will come from are anti-poor."
Analysts said the scheme would end up being funded through the budget as there was little scope for reallocating government expenditure.
"I don't see how they can find the resources without creating fiscal pressures," said D.K. Joshi, economist with credit rating agency CRISIL. "This means meeting the fiscal responsiblity act targets will be even tougher."
India is already grappling with a combined fiscal deficit of central and state governments equivalent to more than 9 percent.
The plan is part of the Congress-led government's efforts to support the rural poor, who helped bring it to power last year, and to fulfill its promise to enact reforms "with a human face".
It would offer one member of each household the chance to work at the legal minimum wage for 100 days a year on improving rural infrastructure, in areas like water conservation, tree planting, construction of irrigation canals and rural roads.
Last month a parliamentary panel recommended the scheme be expanded to cover all rural households, not just the poor as originally formulated. Most political parties support the plan despite misgivings among some lawmakers about the cost.