India Moves Toward Guaranteed Jobs Program for Rural Poor

India’s government is moving to keep a risky promise of guaranteed jobs for millions of rural poor despite warnings that it can’t afford a multibillion-dollar welfare program.

A national rural employment bill, which guarantees at least one worker in each household at least 100 days of manual labor a year, passed the lower house of Parliament late Tuesday. The upper house is expected to approve it in the coming weeks.

Economists estimate that Prime Minister Manmohan Singh’s government will have to spend $9 billion annually on wages, materials and oversight of the program; India’s budget this year is $120 billion.

The jobs bill promises rural workers a minimum wage of around $1.40 a day for work on development projects, such as building roads, planting trees or digging irrigation canals. The government says it will pay the same amount in welfare to any of the workers who can’t find employment.

It plans to employ up to 25 million people in the program, which will start in about 200 districts and expand to the remainder of the nation’s 600 districts within five years.

Previous governments have tried similar make-work projects at least four times since independence from Britain in 1947, and each effort got bogged down in corruption and bureaucratic mismanagement.

D.H. Pai Panandiker is one of many Indian economists who doubt things will be different this time. “They have not spelled out where the money is going to come from,” said Panandiker, who heads the RPG Foundation, a private think tank in India. “I have a fear that if the money is coming out of the [current] budget, it could lead to inflation. The deficit will be too high.

“And the second problem is whether the delivery system will be effective enough to ensure the money goes to the right people.”

In a nation of more than 1 billion people, the number who live in the countryside tops 700 million. Roughly 350 million live in severe poverty.

The government has promised to cut that number with its work program, although paying employees $1.40 for 100 days won’t push participants above the $365 yearly income mark widely regarded as the poverty line in many developing nations.

“I cannot say that rural areas will turn into heaven,” said Rural Development Minister Raghuvansh Prasad Singh. “But I can assure that the standard of living will definitely improve and our effort will be that no one should be below the poverty line.”

The government will soon introduce another bill to guarantee jobs for millions of workers in cities, the minister told Parliament.

The prime minister has set the ambitious goal of eradicating poverty in India by 2020. Economists can’t see how he’ll pay for it. The federal government is already running a huge budget deficit, estimated at 4.5% of the gross domestic product. By comparison, the U.S. budget deficit is around 3.5% of GDP.

Over the next three years, the World Bank will lend India up to $3 billion to help improve rural infrastructure, such as roads and water supplies for drinking and irrigation, Paul D. Wolfowitz, the bank’s new president, announced last week.

Most of the money will go to state governments. Manmohan Singh’s government says it needs $100 billion in public and private investment over the next seven years to upgrade decrepit power grids and transportation infrastructure such as highways and ports, whose poor condition hampers economic growth.

India “is still home to a quarter of the world’s poor people, most of whom reside in the rural areas,” Wolfowitz, former U.S. deputy Defense secretary, said Saturday during a visit to India. “Infrastructure constraints are an impediment to growth.”

The prime minister was the architect of reforms that began shifting India’s economy away from socialism in the early 1990s, when he was finance minister.

He has promised to reenergize economic reforms but is struggling against left-wing parties in his coalition government, which recently forced him to drop plans to sell off several profitable state-owned companies.

India’s economy is expected to grow about 7% this year, but it is lagging far behind China, its neighbor and chief economic rival. The majority of Indians say they are not benefiting from the rapid economic growth.

In a recent poll by India Today magazine, 52% of respondents said only the rich were gaining from reforms.

The guaranteed-jobs bill is the brainchild of Sonia Gandhi, head of the ruling Congress Party, whose late husband, Rajiv Gandhi, tried a similar program when he was prime minister in the late 1980s. The former leader was assassinated while campaigning in 1991.

Under Rajiv Gandhi’s employment plan, less than 20% of the money reached poor workers, a study by the government’s planning commission found. The rest was lost to corruption and administrative costs.