4 SOCIAL SCIENTIST it is evolving, may not be as benign. It may henceforth become a destabilising force and further reinforce the vicious tendency of increasing the gap between the rich and the poor which is characteristic of the development experience of all third world non-socialist countries and especially India. Although systematic data to test these misgivings is non-existent, there are some developments in the manufacturing sector which support our prognosis. The Record While this is not the place to discuss the character of India's economic development, a brief reference to it is relevant for our argument. The most important influence on India's economic growth during this period has been the national plans which assign a major role to the public sector but, at the same time, accept the principle of private ownership and control of a large part of the productive resources. In this planned development process, the priorities adopted for public sector investment have been such as to require highly capital-intensive techniques. The products on which the public sector has concentrated are those like steel, power, cement and heavy engineering. Further, the choice of capital intensive techniques for such production has been facilitated by the fact that the cost of capital to the government is substantially lower than to the private investor. For the large investors in the private sector again, the cost of investible funds is substantially lower than the rate which prevails in the hundi market or that which is charged by the indigenous moneylenders. Because of the imperfections of the capital market, the high opportunity cost of credit is not reflected in the institutional credit market where only the large and well established firms have an entry. In addition, these firms are also provided with inputs which aid further mechanisation such as power or mechanised transport at subsidised rates by the public rector. On the other hand, these are the very firms which, in the past, had occasionally to concede considerable wage claims due to union pressure. These factors together have resulted in these firms consistently adopting relatively more capital-intensive techniques. The tendency has been further reinforced by the policy of encouraging private investors to produce goods of international marketability—goods which are either direct substitutes for imports or produced for exports.^ The firms attempting this are allowed to adopt not only the product-mix but also the technology of the countries producing similar goods. The Results The outcome of this pattern of development has been that: (1) Employment in the modern sector, which gives the workers some Security and a living wage is not increasing as fast as the capital stock