Clearing the Cobwebs - Implosion: India's Tryst with Reality - page 63

when the private sector profit was frowned on [except when it lines the pockets of politi-
cians]?' I asked on my blog in August 2012. 25
Raghuram Rajan, who became governor of the Reserve Bank of India in 2013, criticized
the Gandhis' favourite aid project, the National Rural Employment Guarantee Scheme
(NREGS, renamed the Mahatma Gandhi National Rural Employment Guarantee Act,
MNREGA, in 2009). The scheme guaranteed at least 100 days' employment a year to those
volunteering for unskilled manual work. In a 2010 interview, he said it was 'a short-term
insurance fix' for dealing with problems of the poor, but added: 'If it comes in the way of
creating long-term capabilities, and if we think NREGS is the answer to the problem of
rural stagnation, we have a problem'. 26 The scheme helped to boost rural wages in many
(though not all) states, but was inefficiently and corruptly run, with money being siphoned
off on the way down to villages. It also frequently involved unproductive projects. In April
2013, the Comptroller and Auditor General (CAG) condemned extensive misuse of funds
and incomplete projects. 27
Similar criticisms were made of food security legislation 28 that was passed at the insist-
ence of Sonia Gandhi, who led the final debate in parliament despite opposition from senior
government ministers and the Reserve Bank of India. 29 Aimed at providing five kilograms
of subsidized rice per family, wheat and other food grains every month to tackle wide-
spread hunger among the poor, it ranged far wider and was gifted to a total of 810m people
(75 per cent of the rural population and 50 per cent in urban areas). This brought the total
cost of subsidized food aid to $21bn a year, which could not be afforded when the country
was facing a growing current account deficit. Surjit Bhalla, an economics commentator, put
the cost at 3 per cent of GDP. 30 There would inevitably be massive waste as funds leaked
and food was diverted or rotted in India's inefficient food distribution system; experts also
argued that the balance of protein was inadequate. But such concerns were not a priority
for Sonia Gandhi, who regarded the scheme as a potential vote winner at the 2014 general
election. Incredibly, Gandhi insisted on going ahead with the scheme and announcing it on
Rajiv Gandhi's birth anniversary, even though the country was in the middle of a financial
crisis with a mounting current account deficit and a plunging rupee. 31 Later, in order to
keep the scheme running, the government even disrupted World Trade Organisation nego-
tiations on an international food security agreement that was supported by other developing
nations. 32
The Gandhi family had however shelved some of their ambivalence about reforms by
the end of 2012 and publicly backed various measures when India faced a run on the rupee
and a sharp decline in its international image as an investment destination. They allowed
Chidambaram, reappointed as finance minister in 2012, to try to revive the economy, to
move ahead on various measures including foreign investment in supermarkets and air-
lines, and de-regulation of fuel prices which continued into 2013. 33