INTRODUCTION 5 Official Explanation/or Stagnation The government's explanation for this dismal performance runs in terms of factors such as drought, petroleum price increase and infrastructural bottlenecks. While it is undeniable that a serious drought did affect agricultural production in 1979-80, it docs not explain the persistence of stagnation in industrial output despite a subsequent recovery in agricultural production. .As regards the emphasis on infrastructural bottlenecks also being held responsible for the sluggish industrial growth, it must be borne in mind that they did not appear all of a sudden. To a large extent they are a consequence of a fairly large cut-back in public investment since the mid-sixties. A major consequence of this cut-back in public investment has been a distinct deceleration in the industrial growth rate which has not exceeded 4 percent per annum since the mid-sixties. It is only within this context of shrinking growth possibilities that "infrastructural" bottlenecks can cause a zero or near-zero growth performance in industrial production. Similarly, a mere improvement in the infrastructure cannot by itself alter the overall context of dwindling growth possibilities whose roots lie deeper. This maybe seen in the fragile basis of the government's expectation of a 4 percent growth rate in industrial production in 1980-81—improvement in coal output. Coal production, which has been stagnant at about 105-106 million tonnes since 1976-77, had risen by 8.5 percent irT the first nine months of 1980-81 over the corresponding level in 1979-80. However, thp movement of coal to major sectors like cement and steel plants, where capacity utilization had been constrained by infrastructural bottlenecks, declined during this period, compared to the 'previous year. If this was the case during the first nine months of 1980-81, the expectation of a 4 percent growth for the whole year is wishful thinking. The influence of drought and successive petroleum price increases on the continuing inflationary pressures in the economy and the worsening balance of payments position is also questionable. How could the severe drought of 1979-80 affect prices in a later period when the government has sufficient buffer stocks of foodgrains and sugar? Even in 1980-81 (upto 17 January 1981), a year said to be one of recovery in agricultural production, wholesale prices of cereals rose by 10.4 percent, and the government talks of increasing issue prices of rice and coarse grains "in view of persistent upward revision in procurement prices." Such increases are not necessary if the government directly taxes away the profits of