4 SOCIAL SCIENTIST steeper in consumer durables like motor cars, sewing machines, radios, airconditioners and refrigerators. Everything points to the persistently poor performance of the industrial sector. More recently, however, industrial production which recorded a seven per cent increase for 1975-76 seemed to portend a revival and recovery of the economy. But the fact remains that the situation is full of contradictions, For example, bumper crops and buffer stocks could not prevent a rise in the wholesale price of foodgrains. Increased exports are accompanied by deteriorating terms of trade. The government is inviting aid and investment from abroad and creating a favourable atmosphere for both, even when foreign exchange reserves are accumulating for want of suitable avenues of utilization. Forces Blocking a Breakthrough That the upsurge experienced in 1975-76 is unlikely to be sustained is the main point made by M J K Thavaraj, Prabhat Patnaik and S K Rao. On the industrial front, production appears to be tapering off. In fact between March and September 1976, output actually declined by almost 8 per cent. Whatever growth has taken place, is explained partly in terms of a conscious policy of stepping up production of public-sector units despite falling demand: growth of output in 1975 was most marked in mining, electricity and other units producing basic and capital goods. The result has been deliberate holding of stocks by government enterprises. The good harvest of 1975-76, the credit for which goes to the monsoons, has also been responsible for the increase in industrial production. There is no concrete evidence that the growth in 1975-76 represents a breakthrough from the earlier stagnation. It is essential therefore to analyze the causes underlying the stagnation in industry since the third plan period. Two different but not necessarily exclusive arguments have been advanced in this number. While Ashok Mitra and Mridul Eapen (in the case of textiles) have pointed to the constriction of the home market arising out of inflation and the consequent decline in real incomes of large sections of the population, Prabhat Patnaik and S K Rao view the deceleration in state investment over time as of major significance. The link between the two arguments can be seen when considering the forces, which according to them, underlie the more obvious contributory factors. The decline in demand, according to Mitra and Eapen, follows essentially from the shift in the terms of trade between agriculture and industry, in favour of the former, reflected in an inflation in prices of foodgrains and agricultural raw materials. This in turn stems from the monopoly ownership of land and the consequent concentration of surplus in the hands of large farmers who can push up prices aided by the procurement policy of the government. Further, the rise in foodgrain prices leads sooner or later to a rise in prices of industrial goods, a point elaborated in