New Economic Policy and Vulnerable Sections Rationale for Public Intervention

the spirit of Structural Adjustment Reforms as preached by the Bretton Woods institutions (who do make a possible exception of tax on agricultural incomes). During the stabilisation phase attention to the poor and the vulnerable sections should be all the sharper. This is because of the acute and pervasive nature of poverty in India. More so because two important planks of stabilisation policy, namely, curtailment of public expenditure and withdrawal of subsidies, can have important repercussions on the employment situation and welfare level of the vulnerable sections. There is an urgent need for designing proper protective measures for the poor in this context. Curtailment in Public Expenditure: A cut-back in public investment, as much as the closure of the uneconomic units, leads to retrenchment of the workers particularly those who are easily dispensable. These belong, generally, to the unskilled, unorganised and weaker sections. The impact of the cut in public expenditure may go beyond the difficulties to be faced by retrenched workers and may prove more damaging to the, poor. By cutting back on investment in the infrastructure, prospects for employment are further jeopardised; as infrastructure creation is more labour intensive the impact on employment is also more serious. Secondly, infrastructure has strong forward linkages with several other economic activities. A curtailment of investment in infrastructure will have a multiplier effect on unemployment. A cut-back in the welfare activities will have an additional debilitating impact on the vulnerable sections. A decline in investment in health or education or nutrition even if filled in by the private entrepreneurs will deprive the poorer sections of the basic avenues of self-improvement.