All entries for Friday 11 February 2005

February 11, 2005

Making it Work

The Telegraph, 11.02.2005

Abhirup Sarkar gives a valuable insight into the abstract idea of the rural employment guarantee bill (“Working at it”, Feb 1). The proposed scheme also carries dangerous inflationary implications for these areas, as more employment might trigger speculation on the retailers’ part about the purchasing power of the local people. This could consequently mean a wholesale price raise across commodities without an actual rise in living standards of the poor in rural India.

There is another point to ponder on. Given India’s spiralling fiscal deficit and the unrealistic targets of the Fiscal Responsibility and Budget Management Act, it would be disastrous for the government to pump in more money into this scheme. As Sarkar mentions, political gimmickry has to be stopped if the long-term interest of the economy is to be ensured.

Cyclical unemployment is unavoidable in a market economy with its booms and recessions. However, it is structural unemployment that we have to counter. For this, the proverbial pie needs to be made bigger. We have to make it easier for enterprise to flourish. The government must give incentives to private firms to carry out infrastructural projects in rural and urban areas simultaneously. China has generated jobs in construction and infrastructure precisely in this way, and India is equally capable of doing a re-run.

February 2005

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