While it is obvious that a current account deficit, reflecting as it does the fact that the country is living beyond its means, needs for its cure a reduction in the domestic "absorption" of commodities, the question that remains is whose absorption is to reduce to sustain adjustment. The specific manner in which the International Monetary Fund and, therefore, the government want this absorption to reduce (i.e. achieve "stagnation") is governed by the fact that its conception of medium-term adjustment is to create appropriate conditions for private, including foreign, capital to flourish: if capital is to flourish, stabilization must be at the expense of the working people in the towns and the countryside, i.e. at the expense of the workers and peasants. Fund stabilization measures therefore invariably entail a reduction in the fiscal deficit not through higher direct taxes upon the rich, but through cuts in subsidies to the poor, especially food subsidies, the dismantling of the public distribution system, cuts in welfare expenditures, and higher indirect taxes and administered prices.
 
The removal of all restrictions on the inter-state movement of foodgrains announced in the budget for 1993/94 implies that, for any given level of the harvest and a given hike in procurement prices, the extent of speculative price increases would be higher. With the recent massive increase in procurement prices, and the likelihood of an indifferent or bad harvest in the wake of five relatively good monsoons, the decision to remove restrictions on the foodgrain trade is indeed ominous. Add to this the effects of the removal of rail tariff concessions on the transport of essentials, including foodgrains and increases in the administered prices of essentials like sugar, and the direct attack on the living standards of the working people becomes clear.
 
To ensure that the effects of high indirect taxes and administered prices as well as of lower food subsidies are not counteracted through high money wages, the Fund generally suggests a money wage freeze even as the real wages are being eroded. In India thus far the effort to curtail wage increases comes in the form of efforts to swell the ranks of the unemployed through exit policies that most often make the workers pay for the mismanagement and virtual loot by industrial families of firms under their control.
 
In lieu of all this the only offer the government has to make on the welfare front is a step up in rural development outlays, including those on rural employment programmes. If past experience is any guide, little of this increase would actually trickle down to those who bear the burden of the adjustment strategy. Further, to the extent that the adjustment strategy aggravates external vulnerability and renders her susceptible to international speculation, the extent to which the government can increase its welfare expenditures and therefore the degree of absorption in the system would be determined by fluctuations in the exchange rate.
 
This implies that not only do methodological errors and the sensitivity of poverty indices to the nature of the harvest warrant scepticism about the government's claim of a sharp trend decline in poverty, but one also has to realise that there are tendencies working towards an accentuation of poverty in the current world environment.