By Jason Overdorf
Newsweek (October 2, 2009)
Even as India's government pours $5 billion into a scheme to ease rural unemployment, its plan may be contributing to an inflationary spiral that's making the cost of living more burdensome for the country's poor. According to a new report from the National Council of Applied Economic Research, the rate of rural wage increases doubled to nearly 8 percent after 2006, when Prime Minister Manmohan Singh implemented his rural-employment guarantees. However, the rural poor didn't benefit as much as expected, because the price of basic commodities rose just as fast. Critics blame Singh's program for the bout of inflation, while proponents argue that the total outlay amounts to less than 1 percent of GDP─hardly enough to cause India's inflation woes. Either way, the plight suggests that the rural poor need not just more jobs but better ones. If they could produce more with the same amount of labor, that would increase the amount of basic goods available and bring down prices. But there's another sticking point: the government has amassed mammoth food reserves, which critics say has created an artificial shortage─and higher prices. Singh is eager to help India's poor, but good will doesn't guarantee good results.