THE FISCAL CRISIS AND THE MONETARY SYSTEM 47 asserting its own right over common property, a process which has to that extent postponed a resource crisis. But at the same time the same process has created a mass of poor whose poverty, a direct consequence of State action, threatens to unsettle the entire political coalition, thus increasing the cost of maintaining the coalition further. Fof managing the coalition and rationings favours to groups in the coalition, the government had to build up an enormous network of bureaucracy and government cadre, directly increasing the cost of the political system. The coalition has been managed by maintaining a status qua in the relative position of classes withim it. This requires that a grant or transfer given to one class has to be matched by a similar favour to another, resulting in an escalation of transfer expenditure. Also, since the overall growth of production is slow, and tax and imposts on the well-to-do cannot be increased, the cumulative rise in transfer and consumption expenditure can be met only by a continuous squeeze on the real income of the common people. This used to take place through indirect tax increases, but more recently a hike in public sector prices, and upward revision of nominal income of all inside the coalition have become more common. The arithmetic result is simple. The growth of consumption expenditure of the government (i.e., the cost of managing and saving the political system) and transfer expenditures (i.e., the cost of favours to groups inside the coalition) has more recently resulted in a situation where the entire current revenue of the government is exhausted by these two expenses, and the government has a current account deficit. The growth of the .government's consumption expenditure was most conspicuous during the period covered under the Second Five-Year Plan to the period under the Fifth Five-Year Plan, when it rose on an average by more than 20 per cent per annum at current prices< This was the period of the growth of the government machinery and expansion of government cadre. The rate of growth has since fallen of and in the eighties, consumption expenses take up about 20 per cent of the total annual government expenditure. Transfer expenses began as a large component of total expenditure from the very inception of the new State. It comprised 23 per cent of total expenditure in 1950-51..gradually increasing to 41.3 per cent of total expenditure according to the budget estimates for 1985-86; this increase in proportion has been monotonic and has proceeded at an increasing speed since 1968-69. In fact the estimates are based on the classification of the Ministry of Finance, and it is possible to claim that several items which from the point of view of political economy are actually transfers to different interest groups are not included in this classification; but I do not have the documents necessary to make a proper reclassification of expense items in terms of government's consumption and transfers, at the moment. The fiscal result is preemption of resources for public investment, which is the first objective of the leaders of the political coalition. It is a crisis in the