78 SOCIAL SCIENTIST boosting domestic production. The distribution of income in the domestic market being heavily skewed against the mass of population which remained poor and was unable to provide a market for manufactured goods, import substitution industrialization had to focus on luxuries and consumer durables and be concentrated in the existing urban areas (further aggravating regional imbalance). The fact that tariffs reduced the imports of finished goods from advanced capitalist countries, hower, did not mean that the local industrialists had the capital or technology to begin their own industrialization. The result was increasing foreign debt and participation of foreign transnational corporations. While local production did at first lead to a reduction in imports, after a brief period the foreign exchange saved was far surpassed by the foreign exchange spent on the importation of basic inputs and capital goods and by the massive outflow of profits back to the transnational corporations' home countries. Thus, although the composition of India's imports did change, her balance of payment deficits continued foj^row. Tlie results of the import substitution industrialization strategy were anything but positive: 1) greater starvation for the majority of the people, 2) limited industrialization, 3) growing regional inequalities and 4) large deficits and debt. Since the beginning of the second pjan, given the precarious debt position facing her, it was not surprising that the linchpin of the new strategy for industrialization has been increased exports. This strategy was, in part at least, the result of pressures from international capital and such international agencies as the International Bank for Reconstruction and Development and the International Monetary Fund., In the past, export-led development concentrated on primary commodity sales to the developed capitalist countries. Now7it was to be based on the production and export of manufac-T57I^. By this strategy, the new trade regime hoped to industrialize, Te'SU^c domestic tensions through increased employment, earn foreign exchange imd stimulate the process of domestic capitalist development. Foreign trade is an inseparable part of the process of reproduction of the national economy. Production and domestic circulation, on the one hand, and foreign trade, on the other, are closely related. One of the major functions of foreign trade is the material transfer" mation function. Insof^£^asJ:he domestic economy does not produce all the necessary investment gqodsand consumer goods, foreign trade enables it to carry^dut^changes in the structurg^of the national_jpro-duct, which are required from the point of view of satisfying the 'needs of the economy for capital and consumer goods. The strategy of Third World industrialization should, therefore, be concerned with finding an optimum solution of the relationship between production for the domestic market and the foreign market,