Poverty does not get eradicated merely through higher growth. What is important in this context is the nature of that growth, in particular the extent to which growth is employment-augmenting, since it is the using up of labour reserves that is critical for poverty eradication. By the same token, however, an attack on poverty can be made directly through employment-generating schemes, which have nothing to do with growth per se but which, if properly devised, can stimulate growth through capital formation in the countryside. In other words, instead of making higher growth the primary objective and hoping that poverty eradication would become a mere fallout of it, policy in India can and should aim at making poverty eradication the primary objective and obtaining higher growth its fallout.
 
Fortunately, the conditions at present are favourable for a major thrust in this direction. The 1990s have also made the economy demand-constrained, that is, saddled it with unutilised industrial capacity and unsold foodgrain stocks owing to lack of suff icient demand; indeed the growing poverty and the inadequacy of aggregate demand represent two sides of the same coin. But this very fact, which has been a problem until now, can be converted into an opportunity if the government is willing to take a bol d policy initiative by stepping out of the theoretical straitjacket provided by the Bretton Woods institutions. At the moment there are more than 32 million tonnes of foodgrain stocks with the Food Corporation of India (FCI). This is 12 million tonnes more than the stocks that the government considers necessary for this time of the year. These 12 million tonnes of surplus stocks imply not only enlarged indebtedness for the FCI but also additional interest payments over and above what the FCI would have incurred for holding its "normal" stocks. These stocks exist owing to inadequate demand for foodgrains in the public distribution system (PDS), which in turn means that at the prevailing issue prices of foodgrains distributed through the PDS, the purchasing power of the rural poor is insufficient to lift these stocks.
 
The situation therefore offers an ideal an opportunity to launch a major anti-poverty initiative by providing purchasing power to the rural poor. Such an initiative, apart from effecting poverty reduction and bringing down surplus stocks, could, if properly conceived, result in substantial and useful capital formation in the countryside, in the forms of rural infrastructure, school buildings, and so on. It could even be combined with a programme for universalising primary education, since several of the infrastructural requirements of such a programme could be covered through the anti-poverty initiative. Moreover, as the foodgrain distribution accompanying the increased purchasing power injected through such an anti-poverty initiative would have to be done through the PDS, in large parts of North India, where the PDS is virtually absent, this would also provide an opportunity to instal or revamp the PDS itself. Since State governments that would neglect this task would fall behind in the implementation of the anti-poverty initiative and hence court political unpopularity, there would be some pressure on them to instal a reasonable PDS.
 
Two additional considerations favour such an initiative. First, the foreign exchange requirement of such an initiative would be virtually negligible, so that no extra pressures on the country's balance of payments would emerge as a consequence of it. This contrasts with virtually any other way of stimulating the level of economic activity in the country. Secondly, since large sectors of industry are in recession still, the complementary industrial products that would be required if such an employment-generation programme is undertaken can be easily provided; what is more, the demand for such products would help industry to come out of the recession and hence stimulate the generation of second-round employment. A major employment-generation programme can be one important component of the Budget. In addition, however, there is a need to revive of public investment, particularly in the area of infrastructure.
 
If the financial resources for such an increase in public investment are raised through direct taxes on the rich, so much the better. But even if the government is unwilling to raise larger tax revenue, given the fact that unutilised capacity exists in a host of public sector units producing equipment and c apital goods, it should still go in for increased public investment, financed, if necessary, through a larger fiscal deficit. As long as the deficit-financed public investment expenditure flows back to the public sector units, it cannot conceivably have any adverse consequences for the economy. No doubt, international speculators might get jittery in such a situation. But the Indian economy mercifully is not yet fully "liberalised"; sufficient instruments of control are still available to the government to deal with any adverse consequences of such nervousness. Besides, it is dangerous for the country if the government allows investors' jitteriness to come in the way of preventing an economic development disaster.