54 SOCIAL SCIENTIST Britain, her enormous export earnings could have been used to finance the import of modern technology for building up an industrial structure (as Japan was doing at this period). Nor should it be argued that she would not have had the export earnings if she was not a colony: the industrialising world's expanding, apparently insatiable demand for raw materials would have permitted exports regardless of whether India was the colony of a specific country, or not. The U S was the only other export surplus country which paralleled India performance, but within a very different political-economic scenario, for her export earnings were her own to invest abroad or augment reserves. Finally, a couple of points-may be noted regarding the 'foreign trade multiplier9, which Chaudhuri thinks operated to restore the "level of domestic income to the pre-taxation level" after the unilateral transfer via ''exports which are financed by government budgetary expenditures". There are good reasons to think that such a multiplier could not have operated in the colonial situation. If we confine ourselves only to the macro-economic level, then no doubt a budgetary surplus which is matched by a consequent and equivalent export surplus would leave the level of aggregate demand unchanged compared to what it would have been otherwise. But this conclusion does not hold, the moment we try to penetrate below the macro-level. In an economy like colonial India, the commodities which would be 'released' on account of taxation, i e, the commodities the demand for which is likely to shrink with lower incomes, would be manufactured goods, while exports would consist mainly of primary products. The production of industrial goods cannot be substituted for by expansion of primary products like commercial crops; second, expansion of commercial crops, in a situation where dequate unutilised land does not exist, can only be at the expense of foodgrains production, as indeed was the case. A unilateral transfer of resources abroad in such a situation, when financed by taxation, has a net contractionary effect on the economy: demand for manufactured goods output experiences contraction, while agricultural output remains unchanged, a substitution occurring within it from foodgrain to cash crops. The decline in per capita domestic production of foodgarins in the period 1890-1940 in every region oi British India combined with rising commercialisation, suggests that such a subtitution was indeed taking place. The analysis of unilateral transfers in theoretical literature alluded to by Ghaudhuri is really not applicable directly to the colonial, case. Much of this literature was inspired by the problem of payment of reparations by the vanquished nations, notably Germany, after the First World War. This case differs from that of tribute transfer from a colony in at least three important respects. First, Germany being an advanced industrial country, her exportables too would consist of industrial commodities, so that transfers financed by government taxation would not have the kind of net contractionary effects on the economy