4 SOCIAL SCIENTIST
sector became predominant in the war economies of Europe without displacing the capitalist relations of production in these economies. In the contemporary world, a large share of the state in economic activity seems to have become a permanent feature of advanced capitalist systems. Tsuru5 and Chattopadhya6 have cited evidence to show that, in fact the share of the state in economic activity in the advanced capitalist economies of Europe and the USA is actually larger than in India. Evidently, the social character of state capitalism is to be understood not in terms of its size but, rather, in terms of the specific impact on different social classes.
In relation to the deployment of financial resources, the operations of the state sector may be grouped into two broad categories: physical 'public' investment and financial operations of the 'public' sector. Within physical public investment, one part consists of investment in infrastructure and social overheads while the other part consists of investment in the industrial sector itself. At one level, we might view them as class-neutral in the sense that they are beneficial to all classes and do not benefit one class at the cost of another. Creation of a modern system of power, communications and transportation; development of education, health and other welfare facilities and the growth of industry is naturally beneficial from the point of view of the people as a whole. But even at this level one might argue that the differences in wealth-income positions and social status severely limit the capacity of some classes to enjoy these benefits in either production or consumption, so that the distribution of benefits from physical public investment is highly skewed in favour of the upper wealth-income strata of our population.
This argument however is peripheral. The real function of pliysical public investment lies elsewhere. As Dasgupta7 and others have pointed out, there was substantial accumulation already of usurer and merchant-capital in the hands of a nascent indigenous bourgeoisie during the colonial era. Communities prominent for the pre-capitalist forms of accumulation were the Marwaris of Rajasthan, the Chettys and Naidus in the South and the Parsees and Gujaratis in the West. Growth of industries however, was minimal and even among these, indigenous enterprise was restricted to a few small pockets, for example, cotton textiles in Bombay-Ahmedabad. One of the essential preconditions for the rapid transformation of this pre-capitalist accumulation into modern industrial capital in the post-colonial economy was the provision of certain physical or technological requirements for this transition, that is, modern systems of communication, power & transportation; urban development, training and education of skilled manpower, and finally the quick development of a few basic industries.
The rapid creation of this material basis for India's industrial revolution, however, could not have been easily achieved by private capital for at least three reasons: (a) the type of investment required would involve rhe tying up of large amounts of capital over a long gestation