Workers remove plastic sheeting covering sacks of wheat at a storage facility on the outskirts of Amritsar yesterday.
NEW DELHI: The finance minister insisted yesterday the government could afford a vast new food programme for the poor, despite growing concern about public finances which drove the rupee to a new lifetime low.
The currency, which has been under sustained pressure, fell three percent to Rs66.30 to the dollar, while the stock market tumbled 3.18 percent after the Lower House of parliament passed the government’s flagship Food Security Bill.
After the day of market mayhem, Finance Minister P Chidambaram called the financial situation “grave”.
In a bid to calm investors, he reiterated promises that the government would meet its deficit targets despite the budgeted $19-billion annual cost of the food programme.
“The absolute number indicated in the budget is a red line and the red line will not be breached,” Chidambaram told parliament.
Some economists are concerned about the financial burden of the scheme at a time when investors are pulling out of India, and even supporters say it faces problems — including a corrupt distribution system. The food legislation, a flagship programme of the ruling Congress party is intended to “wipe out” endemic malnutrition by offering subsidised grains to 800 million people.
Chidambaram said the government had “done its sums” and the country could afford the food scheme.
But he said that India’s squabbling lawmakers would have to unite on a strategy to revive the economy.
India’s economic growth has slumped to 5.0 percent on an annual basis, its slowest rate in a decade.