1976-77 BUDGET, the first after the declaration of emergency, comes as no surprise to those who have watched the development of the Indian economy over the past few years. But it is unique in the sense that for once it has clearly spelt out the line of development which the Government of India has chosen to pursue, given the logic of the situation.
In the last few years a certain amount of development did take place in industry and agriculture but it has given rise to serious imbalances within the economy: recession which used to be confined to a few industries before has now become more widespread. Indian industry, in particular the big monopoly houses, has operated in a protected market, generously aided by government and its agencies in the form of subsidy, credit and other financial assistance governed by an apparently tight system of licensing and controls. But this system was in effect so divorced from overall priorities in respect of investment and production that it led to the evolution af an industrial structure which has very little to do with the vast majority of the population, catering, as it does, to the consumption needs of a very narrow section. The public sector has played an important role in providing the infrastructure and crucial intermediate inputs, like steel or non-ferrous metals, essential for the growth of private industry most of which has been in the field of non-essential items of pro< duction.
What has happened since the late sixties, however, is a very sharp deceleration in the rate of growth in the economy and the emergence of large excess capacity in almost all industries.l This is symptomatic of the lopsided economic development, the result of faulty government policies. ^he economy today is facing recession and stagnation especially in the
n-essential consumer goods sector. The malady is lack of demand, though it may be noted that it is not declining demand which seems to be causing anxiety but the type of demand for the above-mentioned industrial goods, investment in which no doubt raises growth rate despite appropriation of the gains by a very small section of the economy. A revival of investment in these industries can occur only if there is a revival of demand for the products of these industries. It is the endeavour of the budget to do just