1 SOCIAL SCtENtlSt
accounted for a dominant share of the marketable surplus that filled government godowns, while others even saw a decline in per capita production and incomes. This, according to Prabhat Patnaik, ensured that large tracts of the country lacked the wherewithal to absorb these surpluses, resulting in an underconsumption-induced accumulation of food stocks, in a period when per capita availability was stagnant.
These stocks provided the basis for deficit financed investment and expenditure that not only resulted in a much sharpar increase in profits but also in the incomes of the organised and vocal urban working and middle classes, who were to an extent "pacified" in this manner, the slow rate of overall growth notwithstanding. As Abhijit Sen demonstrates in his paper, since the early 1970s not only are incomes in the urban organised sector higher than in the unorganised sector in both rural and urban areas, but there have been significant increases in average per worker incomes in the sector. These incomes, according to Prabhat Patnaik, have provided the market for an import intensive set of manufactured goods that are the leading sectors in the 'recovery" from the industrial stagnation of the 1960s and early 1970s. Thus, the transition from that phase of stagnation to a phase of moderate recovery as of the late" 1970s, followed a shift from a period of "classic profit inflation that squeezed real wages" to one where the squeeze on agriculture was used to sustain a non-inflationary increase in urban demand. That is, the success of capitalist industrialisation in an economy where agrarian reforms have not ensured an expansion in the mass market for manufactured consumption goods, depends on the ability of the state to finance that development through a squeeze on agriculture—though that ability has as its essential component the maintenance of the large mass of the rural poor in a position where they are even unable to meet their requirements of food. However, such a strategy is not without constraints. The growth in the consumption of import intensive manufactures it involves renders the balance of payments and not the agricultural bottleneck, the binding constraint on economic development.
The fall-out in terms of uneven regional growth that this process implies has not been corrected for through state action, as I.S. GulatFs analysis indicates. In fact regional diversity is only being further aggravated by the nature of the financial regime under India's quasi-federal system. Statutory transfers of the Finance Commissions notwithstanding, the process of centralising revenues in the hands of the central government continues apace, resulting in the fact that most states have become totally dependent on grants, loans and plan transfers from the Centre to meet their current and capital expenditures. Combined with the trends spoken of earlier, this provides the basis for the growth of separatist tendencies in both the backward states denuded of the fruits of development and the more developed ones that see themselves as being deprived of the full beni-fits of their prosperity.