FALLING TENDENCY OF PROFIT RATE 25 ii) the rate of surplus value s' == — ... (3) iii) the organic composition of capital q =s - ... (4) By combining the equations (2), (3) and (4), the law of the falling tendency of the rate of profit can be represented by t- ,-^, - W It follows from equation (5) that the rate of profit p varies directly with the rate of surplus value s' and inversely with the organic composition of capital q. As already pointed out, the organic composition of capital q displays a steadily rising trend over time due to continuous technological progress. If we now introduce an assumption that s' remains constant, the rate of profit p would tend to fall. Marx believed that there are some counteracting influences at work, which thwart and annul the effect of the general law. He enumerated six such counteracting causes: 1) increasing intensity to exploitation; 2) depression of wages below the value of labour power; 3) cheapening of elements of constant capital; 4) relative overpopulation; 5) foreign trade; and 6) the increase of stock capital. Nevertheless he believed that these counteracting causes cannot continuously exercise their upward influences on the rate of profit and falling tendency cannot be averted for ever. STATISTICAL TEST This article attempts an empirical verification of Marx's law of the falling tendency of the rate of profit on the basis of Indian data. The Census of Manufacturing Industries (CMI) and the Annual Survey of Industries (ASI) together provide us with data that roughly correspond with the Marxist categories necessary for the calculation of organic composition of capital, rate of surplus value and rate of profit. The CMI was started in 1946 and was subsequently replaced by the ASI in 1959. The present study is based on CMI and ASI data covering 20 years from 1946 to 19651. The value of materials, fuels, electricity, lubricants and other inputs purchased and consumed in the manufacture of products and byproducts, work done by other concerns and the allowance for depreciation of plant and equipment presented in the annual reports of GMI and ASI roughly correspond to the constant capital c. The variable capital v roughly corresponds to all payments made in cash to production workers, as compensation for work done during the year. The surplus value s can be obtained by subtracting the total capital, that is, the sum of constant capital and the variable capital from the sum of ex-factory value of products and by-products exclusive of any incidental expenditure on sales and adjusted for the difference in