resource mobilisation in india
TRANSCRIPT
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SAVING AND INVESTMENT IN INDIA &
RESOURCE MOBILISATION FOR PLANNING
DR. LAXMI NARAYAN ASSISTANT PROFESSOR OF ECONOMICSGOVT. COLLEGE FOR WOMEN, BHODIA KHERA
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LECTURE OUTLINE
Role of Saving and Investment.
Analysing Trends in Saving and Investment in India.
Causes of Low rates of Saving and Investment and Suggestions to Improve them.
Plan Financing in India.
Deficit Financing and External Financing.
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SAVING
AND
INVESTMENT
IN INDIA
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Saving: Definition
Saving(S) is the excess of income flows(Y) over consumption flows(C) during an accounting year in the economy.
S=Y-C Saving(S) can be increased either by raising the level of income or by reducing consumption in the economy.
In LDCs it should be raised by raising the level of income because consumption level is already low and it may dampen the inducement to invest.
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Investment: Definition
Investment is the expenditure on acquisition of production capacity.
Investment enhance production capacity by adding to the stock of capital.
Expenditure on acquiring capital requires savings.
Investment is funded through saving.
Investment increases income.
Increased income makes larger savings possible.
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THE VICIOUS CYCLE
Economy Trapped in Low Level Equilibrium
Rate of Saving & Investment needs to be raised to break the cycle
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THE VIRTUOUS CYCLE
Savings when invested
leads to greater
generation of income
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COMPONENTS OF SAVING
A. Household Savings Savings of the individuals/families. Savings on non-profit private institutions, serving households Viz.
School, Hospitals, Colleges etc. Savings of non-corporate business enterprises, referring to small
business establishments like local medicine shops and small grocery outlets.
B. Corporate Savings Savings of the private companies Savings of the Corporate Banks.
C. Public Sector Savings Savings of the departmental enterprises(like P&T, Railways). Savings of the non-departmental enterprises(like AIR, Indian
Airlines etc. which are like private corporations)
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GROSS DOMESTIC SAVINGS
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INVESTMENT IN INDIA
A. Investment(Capital Formation) Increase in the stock of capital is called Capital Formation Investment Occurs when saving is used for purchase of new
machines and tools, or for building of roads, factories, powerhouse etc.
Capital Formation includes (a) Fixed Capital Formation (b) Increase in Stocks
Rate of Gross Capital Formation = Gross Investment x 100
GDP
Rate of Net Capital Formation = Net Investment x 100
NDP
Where Net Investment = Gross Investment - Depreciation
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GROSS DOMESTIC CAPITAL FORMATION (GDCF)
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SAVING INVESTMENT GAP
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INFLOW OF FUNDS FROM ABROAD
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CAUSES OF LOW RATE OF CAPITAL FORMATION
Low Level of SavingsPopulation ExplosionConsumerismTaxationFinancial SystemInterest Rate StructureInflationInfrastructural Bottlenecks
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SUGGESTIONS TO INCREASE RATE OF SAVING AND INVESTMENT
Increase in Domestic SavingsExpansion of Banking InstitutionsRural SavingsRational Tax StructureReduction in Non-Development
ExpenditurePrice StabilityLiberal PolicyIncrease in Productivity Standards
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REASONS OF HIGH ICOR IN INDIA
Western Model of GrowthPredominate Role of Public
SectorNatural FactorsLack of Political WillLack of Loyalty and
Faithfulness
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RESOURCE
MOBILISATION
FOR
PLANNING
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Financing for Plans
Plan Financing refers to the SOURCES, METHODS and POLICIES of the government in regard to financial resources for planned development of the country.
Planners are required to strike a balance between the targets of the plans and resources required to achieve those targets.
For every plan government draw a comprehensive programmes for mobilising required resources.
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SOURCES OF PLAN FINANCE
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COMPONENTS OF BUDGETARY RESOURCES
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IMPORTANT COMPONENTS OF RESOURCE MOBILISATION FOR NINTH, TENTH AND ELEVENTH PLANS
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COMPONENTS OF BUDGETARY RESOURCES
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Meeting the revenue deficit of the Government by issuing more currency
Rational of Deficit Financing- Lack of sufficient voluntary savings Taxation Socially unwarranted
Deficit financing is discontinued as a source of financing after 9th plan.
Deficit Financing
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Employment of unutilised resources
Generates additional resources
Combats Recession
Infrastructural Development
Coping with increased demand for money
Favourable Impact of Deficit Financing
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Unfavourable Impact of Deficit Financing
Changes in the pattern of Investment Increase in money supply and Price
Level Increase in Consumerism BOP Deficit Price Rise and Inequality Increase in the Cost of Planning
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Rate of Domestic Saving Saving-Invetsment Gap BCR ARM
Gross domestic Capital Formation Incremental Capital Output Ratio Deficit Financing External Resource Mobilisation Domestic Resource Mobilisation
NEW/KEY TERMS
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Jain & Majhi, “Economic Development and Policy in India” V.K. Global Publications.
R.K. Misra & V.K.Puri, “Indian Economy” Himalaya Publications.
Ruddar Dutt and K.P.M. Sundaram, “Indian Economy” Sultan Chand.
Uma Kapila, “Understanding the Problems Of Indian Economy” Academic Foundation.
REFERENCES
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Discuss the main source of financing India’s Five Year Plans?
Explain the role of foreign capital in financing India’s Five Year Plans?
Critically examine the role of deficit financing in Indian economic planning.
Do you think present rates of savings and capital formation are adequate in India? How these can be improved?
Critically examine the recent trends in Savings and investment in India?
FAQs
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