The State government has a vital role to play in developing groundwater resources to help improve the lot of the poorest people in eastern India's rural communities. Many States have tried to achieve this over the past 50 years through centrally planned public tube-well programs. Recently published research says that most of these efforts have failed to bring irrigation or improved livelihoods to the poor. This research shows how policy makers can have a significant positive impact on poverty reduction by removing pump subsidies and opening pump markets to international competition. Subsidies and import restrictions have kept pump prices in India artificially inflated, by more than 35-45%, over those of neighbouring Pakistan and Bangladesh. If a 'shock therapy' approach of removing restrictions is too drastic or politically difficult, the next best option is to use market mechanisms to manage pump subsidy and loan programs for the poor. A good example of this approach is the jointly managed subsidy programs that have helped usher in eastern India's belated Green Revolution. Here local pump dealers are active participants in the management of pump subsidy programs, alongside government and nationalized banks. The examples of eastern Uttar Pradesh and north Bihar provide working models of such approaches.


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