SHOCKS AND INSTABILITIES IN AN AGRICULTURE CONSTRAINED ECONOMY 47 to the most basic tenets of the multilateral aid agencies, whose views are formulated in models which are essentially savings-constrained. While their powers to enforce their own views on an existing system are limited to occasional nudges during moments of crisis, any attempt at a thorough rationalisation of the existing system wilhm its own terms, as this proposal represents, can and will be strenuously resisted. It is, however, important that a policy regime which has demonstrated in part its inherent virtues be allowed to continue without some of its sharp edges and idiosyncracies, before radical alterations are called for. 1. See Bhagwati, J.N. and T.N. Srinivasan, Foreign Trade Regimes and Economic Development : India, Columbia University Press 1975. 2. Politically, this episode was marked by the loss of the ruling Congress Party of over half the state governments in the elections of 1967. Apart from Kerala in 1956, the Congress had never lost a state election upto them. 3. Unofficially, it is known that the Planning Commission adjusts for the fact that N.S.S, estimates of consumption are usually lower than that obtained by the C.S.O. by multiplying all N.S.S. figures for a common adjustment factor. However, the C.S.O. estimates as given in the National Accounts themselves imply that there have been large re-distributive effects and, hence, use of a common adjustment factor is inconsistent, and lowers the estimate of poverty. 4. For statewise levels and growth of per-capita agricultural output we have relied on the Reserve Bank of India's Report of the Committee on Agricultural productivity in India. For price data, see P. Sen : Stablization, Income Distributions and Poverty : India, ICRIER Discussion paper No. 2 and N. Path's Presidential Address to the Indian Agricultural Economic Association Conference 1985. 5. This is true for per-worker real Incomes even if we take into account, as we strictly should, that the shift of labour from agriculture to unorganised non-agriculture involved a shift from a lower to higher income/worker sector. However, since participation rates rose somewhat during this period, there was a small (about 0.2% per annum) growth in the real income per capita of the unorganised sector as a whole. 6. To this must be added the worsening regional distribution of agricultural income. 7. See* P, Sen op. cit. 8. The Corroborative evidence consists of data on rural wages and employment and certain other scattered micro-studies too numerous to be individually cited. 9. This is cancluded from data in National Accounts statistics Profits, include interest, rent and depreciation. 10. A. Sen : The Agrarian Constraint to Economic Development—the case of India. Unpublished Ph.D. thesis, Univercity of Cambridge, U.K. 11. It needs to be made clear that the case where the'foreign exchange'constraint bites is not the only one where the balance of trade identity holds. This, of course, holds in all three cases. However, in both the agriculture and foreign exchange constrained cases, optimality requires that there be no 'competitive