CRISIS, PLANNING AND GROWTH 5 inflation is to raise the level of production.It is not—it should be said—the fiscal or monetary instrumentalities which are responsible for the price increase, nor the waywardness of administrative decisions, but the lack of output; to remedy the situation,!! would be suggested, all that needs be done is to apply a set of measures aimed at stimulating production. Here we are in the midst of a hen-and-egg conundrum. Increased output depends as much upon additional investment as upon a contented .labour force. Till as long as inflation continues unabated, neither can one expect the working class to behave 'peacefully' nor will investment pick up. Till as long as wage adjustments lag behind the rate of rise in prices, labour will have every right to agitate. To hope to force output up through expansion of productive capacity is likely to prove equally disappointing. Capacity can expand only where investible funds are available on tap. Since, as already mentioned, in a period of inflation resources increasingly get diverted from production to speculation, investible funds will continue to be scarce till as long as there is no decline in prices. For reasons discussed subsequently, if the present circumstances persist, agricultural output too will show every indication of levelling off. Top Priority for Stability Production, in other words, cannot increase at all, or appreciably, unless the present bout of inflation is first contained. A problem of identification obviously comes to the fore: those anxious to establish a causality between production and investment have a point, but the causality runs the other way round; it is only when inflation is controlled that production may be expected to pick up.Ifthis line of argument seems valid for tackling the current crisis, one should really begin with a programme of price stabilization. Effective stabilization will certainly hinge upon a reasonable state of industrial relations and so on.But much more than anything else, it will depend upon implementing successfully measures which directly impinge upon the speculative propensities of the more affluent sections of the community. What all this means is that in the initial phase, the emphasis in policy will be to operate via monetary, fiscal and administrative instruments. The real factors, such as the level of output and availability of goods and services, are of course enormously important but we cannot even begin to deal with them unless a modicum of stability has first been brought about through the enforcement of the short-term measures. II In many countries, a programme of stabilization has consisted of two parts: (a) a series of internal monetary and fiscal reforms, and (b) a heavy injection of resources from outside, often made contingent upon (a). As far as India is concerned, (b) may be ruled out. Given the country's size and population, it will need a massive dose of external resources to cure the country of the inflationary hangover: the geopolitical and other conditions for an inflow of this order do not exist any more. There