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Synopsis Both growth and stability are being undermined by the deteriorating fiscal situation and the falling rate of domestic savings. It is not likely that the savings-investment gap would be bridged by higher inflows of external capital. There is slowing down of the basic productive sectors of the economy: agriculture, industry and infra-structure unemployment and income inequalities are growing; the total numbers of households living below the poverty line are rising. The excessive concern of policy-makers with annual GDP growth is distorting development and impeding progress towards social goals. The exact ‘rate of growth’ is less important for economic and social development than the nature of the growth: its distribution between productive sectors and between the incomes of different functional groups, and its geographical spread. The growth of incomes is presently distributed much more unevenly than before between different regions. The basic measures of social development—falling birth rate, rising life expectancy, improving child health and nutrition, higher levels of literacy and education—cannot be significantly advanced for the population as a whole, unless there is levelling up of the performance of the most backward regions.