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Wednesday, 8 August, 2001, 16:34 GMT 17:34 UK
Rural India questions reform benefits
Many fear the rural poor have not benefited from reform
Many fear the rural poor have not benefited from reform
Ten years since India began to reform its economy, questions remain as to who has really benefited from economic liberalisation.

Some suggest that India's rural poor have yet to see the benefits of reform.

Major rural development programmes were introduced to try and alleviate poverty.

Observers say that the money introduced hasn't achieved what was intended and that the amount of money directed to the rural poor under the plan is falling.

Rural poor

There remain about 50 million families classified as "rural poor", even as the Indian economy continues to grow at about 5% a year.

"One thing which is clear is that there is a sharp decrease in the government's expenditure in rural areas, taking both agricultural and rural development outlay together," Prabhat Patnaik, professor of economics at the Jawa-harlal Nehru University in Delhi told BBC's World Business Report.

Taken as a share of gross domestic product, spending in rural areas has fallen steadily during the 1990s, he says.

"It is now an extremely small figure, about 2%," he added.

Who gets the money?

Part of the problem is that it is unclear if the money spent ends up with the right people.

However Professor Patnaik argues that even if the poor don't get the money, money directed at rural areas will still benefit them.

"Even if the money does not get into the hands of the correct people, even if the poor don't get the money directly, nonetheless the expenditure of rural rich in some sense benefits the rural poor through employment generation," he said.

"But if less government money goes to rural areas altogether, then that is something which has an adverse affect on rural poverty," he added.

Other fears exist that India's rural poor will be hit hard by reform.

Earlier this year, Indian prime minister Atal Behari Vajpayee defended his economic reform programme, saying that the liberalisation of imports would not hurt farmers.

It was also feared that the government's decision to comply with World Trade Organisation (WTO) import guidelines could hit farmers hard.

Slow reform?

However, even as people in India fear the impact of the reform, other analysts question whether the pace of reform is moving fast enough.

On Tuesday, international credit rating agency Standard and Poor's questioned whether the pace of reform was moving fast enough.

It downgraded its outlook on the country's debt, raising questions about India's creditworthiness.

"The country's political leadership, cutting across all parties, remains reluctant to forego patronage opportunities that arise from a bloated public sector, undermining the credibility of India's beleaguered privatisation programme," the Standard and Poor's report said.

Professor Prabhat Patnaik
"There is a sharp decrease in government spending in rural areas"
Professor Prabhat Patnaik
"Even if the poor don't get money directly, it can still benefit them"
See also:

07 Aug 01 | Country profiles
Country profile: India
21 May 01 | South Asia
Vajpayee defends farm policy
08 Jun 01 | Business
World sinks into deeper poverty
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