Consequently, the foreign-currency crisis induced by the agricultural crisis destroyed the economy. This means that India fell into the external trap of tighter foreign-currency restrictions caused by the foodgrain import.
The reason that India fell into the external trap, rather than the internal trap, lies in the Indian doctrine which primarily focuses on stabilizing food prices. For a country that has not conducted any reform of the notably unequal private ownership structure, poverty is the most serious political issue. Poverty in India is quantified by the concept of the "poverty line". The poverty line is defined as the expenditure that can cater for the daily energy intake required for maintaining life (2,400 calories per adult man in rural areas, and 2,100 calories in urban areas); households with expenditure under this level are referred to as the poverty class. The proportion of the poverty level was 55.2% in the fiscal 1960s, and 37.4% even in the fiscal 1983, implying that the Indian economy is still quite vulnerable to the Ricardian Growth Trap. To guarantee the lives of the poverty class that has the least means of coping with rising food prices, the supply and demand imbalance of foodgrains had to be adjusted in terms of quantity by import instead of price. Moreover, in India, where diverse social classes and provinces exist with conflicting stakes and where the election system is firmly established, the Government policies inclined to the Populism. Under such circumstances, increases in foodgrain price have to be avoided. It has been pointed out on the basis of experience that an inflation rate of more than 10% can lead India to political crisis. These situations mentioned so far have driven India into the external trap instead of the internal trap.
1-3 Industrial Stagnation： The Lost 10 Years
The mid 1960s agricultural crisis revealed the contradictory nature of the attempt to advance import-substitution industrialization on a fragile development fund procurement basis. This contradiction was not limited only to the short-term crisis cause by the droughts, but eventually ushered a long-term economic crisis that can be described as "the lost ten years". Table 1-2 shows the transitions of real growth rates of the nine major industrial sectors with high value-added production before, during, and after the lost ten years.
