As the time to table a Bill on employment guarantee in the Parliament draws near, the initial euphoria over its inclusion in the Common Minimum Programme seems to have been replaced by a growing skepticism as powerful forces work to dilute the provisions. The paradox is that the same underlying factors that provide the compelling reasons to enact such legislation also fuel the opposition to the Act. These arise from the neo-liberal policies that serve the interests of finance capital and are pursued with equal vigor by the NDA and UPA governments.

Broadly speaking, three different positions are being taken on this issue. One regards universal employment guarantee as an engine of growth that will revive agriculture and the rural economy by the creation of productive assets and the multiplier effects of demand expansion. Another opposes it on the grounds of non-affordability, corruption, and preference for infrastructure-led growth models.

Yet another position, which lies somewhere between the other two, is taken by those who regard employment guarantee as the 'human face' of globalization. Though they advocate the need for an Act, they are ambivalent towards neo-liberal macroeconomic policies. The divergence lies only in their disapproval of the 'social exclusion' of some from the 'benefits' of globalization while the dubious 'benefits' in terms of growth and good governance are almost never questioned. Like their opponents, they too view globalization as an opportunity and a challenge but differ over the degree of 'humanization' that is politically and financially feasible.

The decisive political verdict of the Indian voters against neo-liberal policies produced a brief period of consensus on the need for an Employment Guarantee Act (EGA). While the neo-liberals realized its political necessity in the interests of a stable democratic system, for the 'humanizers,' it was a means to fight hunger and provide a 'social safety net'. There were also those who valued the potential for broad-based equitable growth. By its very nature, the consensus was fragile. It has broken under the weight of its own contradictions.

While the momentum of the movement for an EGA is pushing towards a more substantive and effective legislation, the neo-liberals are willing to agree to cosmetic and superficial measures only. An EGA stands in direct conflict with the interests of finance capital, whose ideologues within and outside the Government have become suddenly active. Financial interests are extremely wary of inflation. Any policy measure that increases expenditure in the economy and moves the terms of trade in favour of agriculture is detrimental to their interests. Thus, their ideologues prescribe policies that worsen the relative position of the peasantry and agriculture in the Third World along with a slowdown in overall expenditure. Then there is global agribusiness that is looking to shift tropical and sub-tropical agriculture out of foodgrains and into exportable commercial crops of their choosing. They were to some extent successful in influencing policy in India, and these policy changes introduced after 1990 resulted in widespread rural distress.

By the Fourth Plan, it was painfully clear that food self-sufficiency was strategic to self-reliance since the US had already started using the PL 480 programme to exert pressure over policy in India. India has made significant advances in agricultural (including food) production, due to active state support through public investment in infrastructure; limited land reforms; the introduction of the HYV package; minimum support price and procurement of some crops; expansion in agricultural credit and extension services, etc. The home market and peasantry were protected through tariff and non-tariff restrictions on trade.

Despite these achievements, some fundamental problems persisted in agriculture. These included the inability to carry out effective land reforms; the exclusive technological focus on groundwater extraction and high dams for irrigation; the high degree of regional and class concentration of gains from the Green Revolution; lack of accountability and transparency at the local level; environmental degradation; non-implementation of a minimum wage legislation for agricultural labourers, etc.

The present and growing crisis in agriculture has little to do with these weaknesses, and is clearly an outcome of trade liberalization, deflation and specific structural adjustment measures undertaken in the agrarian sector since 1990. Government rural development expenditure declined as a percentage of GDP, from 14.5 per cent in the Seventh Plan to 6 per cent in the Ninth Plan period, implying a projected decline of Rs 50,000 crore in 2000-01 on this count alone.

Rural banking by the Scheduled Commercial Banks (SCBs) worsened in all respects, and the very concept of priority sector lending was severely diluted. The rural branches of SCBs report a falling credit-deposit ratio from 69 per cent in 1991 to 40 per cent in 2001. The number of rural branches fell by 1543, rural branches' share in total credit fell from 14.2 per cent to 10.6. Commercial bank credit has moved out of rural areas, backward regions, agriculture and small-scale enterprises. Furthermore, farmers pay far higher interest rates than the middle class pays for loans to finance luxury consumption!

The Government of India lowered tariffs and opened up trade before required to under WTO. This was at a time when world prices had begun to crash due to mounting subsidies given by the advanced capitalist countries to their agriculture. This exposed Indian farmers to unfair trade, global price volatility and recessionary international markets. World prices peaked in the mid-1990s, and then fell for most crops to below pre-peak levels. However, Indian farmers did not anticipate this, and in the hope of making large gains, they moved to high-value exportable crops, undertaking huge loans in the process. However, the prices in the domestic market were no longer insulated and farmers could not compete with the artificially cheaper imports. Instead of being offered the same subsidy or protection as that in Europe and America, our farmers were left to the mercy of global big agribusiness. Worse, under the structural adjustment programmes and conditionalities imposed by the Bretton Woods institutions, the Indian government withdrew subsidies and extension services.

User charges were raised substantially, without reducing costs and slack in the system (transmission and distribution losses in the power sector are a good example of this). The government reduced subsidies on all agricultural inputs, including seeds, water and electricity charges, fertilizers, pesticides, and agricultural implements. The result is that after a steady increase till the mid-1990s, power consumption by agriculture first stagnated and then declined. It has never exceeded agriculture's share in national income. The rise in prices of fertilizers and power has resulted in stagnation of area irrigated, fertilizer use and yields of foodgrains.

As a result, agricultural production and income growth decelerated in the 1990s. Growth of agricultural production fell from 3.5 in the 1980s to 2.0 per cent per annum in the 1990s, and real income growth fell from 4.5 to 2.5 per cent per annum over the same period. The per capita agricultural real incomes have declined after 1996-97, due to very low yield growth and adverse prices for non-cereal crops. Employment growth fell from 2.04 per cent during 1983-94 to 0.98 per cent during 1994-2000. The gap between urban and rural incomes widened, with per capita urban incomes being thrice the rural incomes.

The final blow was caused by the introduction of the targetted public distribution system (TPDS). The gains made in per capita foodgrain availability towards the end of 1980s were lost in a decade. By 2001, the levels had fallen to lower than those in the 1950s, one of the reasons being the deceleration of growth in foodgrain output. A fall in per capita production ought to be compensated by release of buffer stocks through the PDS, release of food stocks by increase in food-for-work programmes, midday meal schemes, etc. This would protect per capita availability of food and its absorption by the people. However, per capita absorption in 1990s declined on account of large additions to stocks and very high and cheap food exports. This was a direct result of inadequate purchasing power of the rural population due to rising unemployment and deflationary policies that are suspicious of any increase in economic activity through food-for-work programmes, despite comfortable foreign exchange reserves and foodstocks. Hardly 8.5 million tonnes were sold in 2000-01 as compared with 19 million tonnes in 1992 despite population growth and falling production. All these resulted in widespread rural distress.

The existing rural crisis of falling farm incomes, indebtedness, unemployment, malnutrition and land alienation is thus an outcome of deflationary economic policies, structural adjustment and trade liberalization. The central government has promised to enact and employment guarantee, which has the potential of turning around the agrarian distress to some extent. It is indeed ironical that the policies that caused the distress in the first place have created the conditions for their resistance.

In the prevalent conditions, the Act must create a fully centrally-funded scheme that provides work at the minimum wages to all rural adults close to their homes when required by them, and a failure to do so should entitle them to an adequate unemployment allowance, in all parts of the country. The Act should safeguard the interests of women regard to availability, location, type and organization of work. This would mobilize surplus labour in the countryside and unleash productive forces, which is opposed by finance capital and its apologists. Political compulsions might not however allow the opponents of the EGA to prevent the introduction of the Bill in Parliament. But they can deal a deathly blow and dilute the Act by raising objections acceptance even to well-meaning advocates for whom the Act is a social security measure.

The two most popular arguments are the inadequacy of central finances (juxtaposed with allegations of profligacy by state governments) and the apprehension that the rural elite will appropriate the benefits of the scheme (evoking images of exploiting rich farmers and landlords queuing up for the unemployment allowance with the complicity of sarpanches). The prescriptions recommended are a narrow targeted scheme with limited household entitlements (present proposal being 100 days) in the poorest districts whose funding is shared by the Central and State governments in some ratio (currently being proposed at 3:1). These proposals, if accepted, will inevitably result in a weak and inadequate Act that does not address the basic problems it is meant to.

The first casualty is the universality of the scheme, not only in terms of 'poor' and 'non poor' people and districts but also in terms of gender. Entitlements fixed at the household rather than individual level tend to exclude women and push them further into lowly paid arduous work. Such a provision also works against the poor because poverty and lack of homestead space tends to make extended families comprising several households live together.

The policy of targetting is replete with difficulties. Identification of the poor is far from satisfactory, both in terms of the criteria and procedure. Wrong exclusion is rampant and leads to far more serious consequences than wrong inclusion. The livelihoods of vast sections of the near poor too are extremely insecure what with droughts and even minor disturbances pushing huge sections into the quagmire of poverty, hunger and malnourishment. No matter what measure one uses of hunger or malnutrition, there is no doubt that the majority of Indians suffer pervasive and persistent food insufficiency. The National Family Health Survey 1998-99 shows that 47 per cent of children below the age of three were malnourished by the weight-for-age criterion; the National Nutrition Monitoring Bureau shows that 48.5 per cent of adults had a Body Mass Index below the norm in 1993-94, and NSS data for 2000 shows that 75 per cent of the rural population and 50 per cent of the urban population consumed less than required to meet the minimum calorific norm.

The finances of State governments are reeling under the strain of policies beyond their control, including interest rate policy, access to borrowings, etc. At the same time, most social and economic development activities and the provision of infrastructure are the responsibility of the states. The failure to design the scheme on the lines of a food-for-work programme fully funded by the Centre will place it at the mercy of bankrupt state governments, jeopardizing the scheme itself. Additionally, it is constitutionally not possible for the Central government to impose a financial burden on the states without conformity Acts being passed in each State assembly, a procedure likely to cause long delays.

Democracy in India has time and again failed to ensure equality and justice. It is imperative now more than ever to recognize that democracy and distress cannot coexist indefinitely and we have to salvage the remnants of egalitarianism even as the rural economy continues to collapse. The people of this country have clearly voted their preference. Two economists, neither of whom is accountable to the electorate, are making the rules of the game. The ball (and Bill) is in New Delhi's court. The question is: will they play fair?