Resource mobilisation in india

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Resource mobilisation in india

  1. 1. SAVING AND INVESTMENT IN INDIA & RESOURCE MOBILISATION FOR PLANNING DR. LAXMI NARAYAN ASSISTANT PROFESSOR OF ECONOMICS GOVT. COLLEGE FOR WOMEN, BHODIA KHERA
  2. 2. 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.
  3. 3. SAVING AND INVESTMENT IN INDIA
  4. 4. 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.
  5. 5. Investment: Definition  Investment is the expenditure acquisition of production capacity. on  Investment enhance production capacity by adding to the stock of capital.  Expenditure savings. on acquiring capital requires  Investment is funded through saving.  Investment increases income.  Increased possible. income makes larger savings
  6. 6. THE VICIOUS CYCLE Economy Trapped in Low Level Equilibrium
  7. 7. THE VIRTUOUS CYCLE
  8. 8. 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)
  9. 9. GROSS DOMESTIC SAVINGS
  10. 10. 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
  11. 11. GROSS DOMESTIC CAPITAL FORMATION (GDCF)
  12. 12. SAVING INVESTMENT GAP
  13. 13. INFLOW OF FUNDS FROM ABROAD
  14. 14. CAUSES OF LOW RATE OF CAPITAL FORMATION         Low Level of Savings Population Explosion Consumerism Taxation Financial System Interest Rate Structure Inflation Infrastructural Bottlenecks
  15. 15. SUGGESTIONS TO INCREASE RATE OF SAVING AND INVESTMENT         Increase in Domestic Savings Expansion of Banking Institutions Rural Savings Rational Tax Structure Reduction in Non-Development Expenditure Price Stability Liberal Policy Increase in Productivity Standards
  16. 16. REASONS OF HIGH ICOR IN INDIA  Western Model of Growth  Predominate Role of Public Sector  Natural Factors  Lack of Political Will  Lack of Loyalty and Faithfulness
  17. 17. RESOURCE MOBILISATION FOR PLANNING
  18. 18. 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 comprehensive programmes for required resources. draw a mobilising
  19. 19. SOURCES OF PLAN FINANCE
  20. 20. COMPONENTS OF BUDGETARY RESOURCES
  21. 21. IMPORTANT COMPONENTS OF RESOURCE MOBILISATION FOR NINTH, TENTH AND ELEVENTH PLANS
  22. 22. COMPONENTS OF BUDGETARY RESOURCES
  23. 23. Deficit Financing  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.
  24. 24. Favourable Impact of Deficit Financing  Employment of unutilised resources  Generates additional resources  Combats Recession  Infrastructural Development  Coping with increased demand for money
  25. 25. 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
  26. 26. NEW/KEY TERMS       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
  27. 27. REFERENCES  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.
  28. 28. FAQs  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?

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