The scheme targets India's 60m rural households

One member from each of India's 60m rural households will earn a minimum daily wage of 60 rupees (�0.76).

Analysts say it is the first step towards a welfare state in a country where nearly 70% of the population live in villages.

But critics say it increases government spending and will hurt the economy.

The president of India's ruling Congress Party, Sonia Gandhi, told parliament the bill was "historic".

An economy which is growing at 7% per year, can and should find the resources for such a crucial intervention Sonia Gandhi

"We are today passing a truly radical law which has far-reaching and profound consequences," she said.

The BBC's Sanjeev Srivastava in Delhi says the National Rural Employment Guarantee Act is the most ambitious pro-poor scheme launched by an Indian government.

The scheme was an important plank of the Congress campaign

It was an important plank of the Congress Party's election campaign last year, and is supported by its communist allies.

People employed by the scheme will work on projects such as building roads, improving rural infrastructure, constructing canals or working on water conservation schemes.

The government say special priority will be given to women under the scheme, which will be launched in 200 districts this year and will extend to the entire country over the next four.

Cost

The scheme is estimated to cost between �3bn and �17bn and critics say it is not clear how the government intends to meet the costs.

India's finance minister, P Chidambaram, says the government plans to merge several other rural schemes and also ask state governments to contribute 10% of the costs.

But analysts say the government's financing is likely to fall short and warn that the increased spending could lead to a widening fiscal deficit and also push up interest rates.

Ms Gandhi says funding the programme will not be a problem.