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Wanted — Aid Programme Switch to Help Indian Poor

The Indian economy, faced with a massive drop in foreign exchange reserves and a record high foreign debt, is being restructured. The cost of much of the programme is being borne by the poor, who have lost the subsidies they rely on and seen prices rise beyond their means. The answer, reports Gemini News Service, must be to restructure India's foreign aid programme alongside its economy.

Ravi Narayanan writes from Bangalore
AS the Indian economy is restructured, the country's poor will become even poorer, and the ranks of the largest poor population in the world will swell even larger.
The crisis is partly due to a desperate attempt by the Indian government to meet its foreign repayment obligations. Foreign exchange reserves were reduced last year to only two weeks' worth of Imports, because of a sharp fall in exports and income.
Faced also with a record high foreign debt. New Delhi last year borrowed S3 billion from the International Monetary Fund. In return ft devalued the rupee by 20 per cent, pledged to cut the fiscal deficit to 6.6 per cent and undertook to liberalise trade and industrial policy.
This gives a gloomy outlook for India's estimated 320 million poor. The best outlook for agricultural production, on which the incomes of the vast majority of the rural poor depend. will be for no growth.
Projections estimate 1.5 per cent less foodgrains than last year to be produced, and inflation at 12 per cent is nearly three times higher than six years ago.
The poor have been burdened by a sharp cut in fertiliser and food subsidies, as the fiscal deficit has been cut. Farmers also faced a 30 per cent hike in fertiliser prices last year and a further hike this year Is almost certain. Although small (and marginal) farmers were exempted from the rise, the rural poor have not been exempt from its gen-enil Inflationary impact.
The sharp rise tn food
prices has had the most impact on many of the country's poor. Some 16 million tonnes of roodgrains, almost 10 per cent of the nation's production. are distributed each year at subsidised prices by the government through the Public Distribution System (PDS). The beneficiaries are mainly the poor who cannot afford market prices.
In December 1991, to try to curtail the food subsidy, the
government increased the price of rice under the PDS by a hefty 30 per cent and wheat by 20 per cent. PDS sugar prices have also been pushed up 30 per cent during the last two years.
For poor agricultural wage labourers who earn as little as 1 1 rupees a day. these Increases are catastrophic. If left unchecked, they would lead to a further drop In the already low number of food calories
Indians consume each day.
According to the World Bank, India's daily calorie supply Increased by Just one caloric between 1965 and 1988, to 2,104 calorics per person each day. In contrast, the average for 41 of the low income countries rose from 1,988 to 2,331 calories during this period.
Faced with a crunch on its resources, the Indian government has sharply cut its spending on rural development. The ministry's funding has been cut by Rs 4 billion this year, to Rs 31 billion. Money for the rural employment scheme, which forms the backbone of the government anti-poverty effort, has been reduced by Rs 500 million. while rural backwater allocations have been cut by Rs 1.2 billion.
The national budget presented to Parliament al the end of February reflected India's new economic reality. Its highlights — partial convertibility of the rupee, liberalisation of gold imports, Interest and Income tax concessions and import duty reductions — mean nothing for the rural millions, at least in the short term.
They are becoming the major losers as the country, un-
der pressure from International lending institutions, moves to Integrate Ils economy with the rest of the world's.
The economic policies of the government have been designed to tackle the Immediate crisis," says the government's Economic Survey for 1991-92. The crisis has Involved hardship for the people. The government has tried to ameliorate it, but not enough. The resources of the people are limited."
The poor cannot be Just cast aside. In such a situation, foreign aid can and must play an important role in alleviating the problems caused to the poor by India's programme. It could even be said that, with-
out such support, the efiec-tivencss of government may be weakened.
India on average receives less then 82 billion a year as foreign aid. The 82.9 a person India gets is one of the lowest among low-income countries and needs to be significantly stepped up.
At the same time, increase should be directed in such a way that it fits into the larger strategy of poverty reduction and complements the Indian government's approach to tar getlng the poor with special poverty alleviation programmes.
Foreign donors, too, generally agree with this approach. But now, more than ever before, they need to put- their money where their mouths are. The impact of the current Indian economic crisis on the world's largest collection of poor demands no less.
RAVI NARAYANAN was recently appointed deputy director of programmes for the charity Action Aid.