capital formation,sources of capital formation,voluntary savings, involuntary savings, government borrowings,uses of idle ,resources,external resources.

1. ECONOMICS RESOURCES IN PAKISTAN
CAPITAL FORMATION

2. CAPITAL FORMATION
• Capital formation is a term used to describes the net capital
accumulation during an accounting period for a particular country
and the term refers to additions of capital stock such as
equipment, tools, transportation assets and electricity. Countries
need capital goods to replace the current assets that are used to
produce goods and services. And if a country cannot replace
capital goods production deadlines. Generally, the higher the
capital formation of an economy. The faster an economy can grow
its aggregative income.

3. CAPITAL FORMATION
• Capital is one of the important factors which governs the quality and
composition of output in a country. If there are increasing resources of
capital in a country. It results in technological discoveries raises in
technological discoveries, raises productivity of labor. Increase the rate of
economic development and provides higher standard of living for the masses.
• Capital formation is a process of building up the capital stock of a country
through investing in productive plants and equipment capital formation in
other words involves the increasing of capital assets by efficient utilization of
the available and human resources of the country.

4. SOURCES OF CAPITAL FORMATION
• Sources of capital formation
• 1): Domestic Resources
• 2):External Resources
• Domestic resources play an important part in promoting development activities in the
country.
• 1: voluntary savings
• 2: involuntary savings
• 3: Government savings
• 4: use of idle Resources
• 5: Deficit Financing

5. VOLUNTARY SAVINGS
• There are two main sources of voluntary savings a: Households 2: Business sector
• As regards the volume of personal saving of the households. Its depends upon
various factors such as the income per capita, distribution of wealth, availability
of banking facilities value system of the society etc.
• In the undeveloped countries, the saving protentional of the people is low as a
greater number of them suffers from absolute poverty-so far as the rich section of
the society is concerned. They mostly spend their wealth on the purchases of real
estate luxury goods or take it abroad to safe keeping.
• The business sector is an important source of voluntary savings in the less
developed countries. They usually hesitate in assuming the risks associated with
investment

6. INVOLUNTARY SAVING
• In the developing courtiers. the income per capita of the people is low. Their
propensity to consume mainly due to demonstration effect is very high as the flow
of savings is inadequate to meet the capital needs of the country, the government,
therefore adopts measures which restrict consumption and increase the volume of
savings. The traditional methods used for increasing the volumes of saving are
taxation, compulsory schemes. For landing to government.
• The two fiscal measures stated above are very sensitive and delicate. They should
be devised and handed very carefully.
• For instance: if the people of low and middle income groups are heavily tent
through various forms of taxation. Their power to save will be burdened with
taxes. The tax structure is to be devised in such a manner that it should provide
incentive work save and invest for various levels of income groups.

7. GOVERNMENT BORROWING
• The volume of domestic savings can be increased through government issues long
and short terms bonds to various mobilizes saving from the general public as well
as from the financial institution.
• In the developing countries, there are many obstacles which stand in the way of
government’s borrowing. For instance, the money and capital market is
unorganized. The rural sector is not provided with adequate financial institution.
People being illiterate. Prefer to invest their savings in gold, jeweler etc.
• The government of developing countries should therefore evaluate a workable
program of mobilizing the savings of the people both in the rural sectors.

8. USE OF IDLE RESOURCES
• In the developing countries of the world there are many resources which
remain unutilized if they are properly tapped and diverted to productive
purposes, the rate of capital formation can increase rapidly.

9. EXTERNAL RESOURCES:
Foreign economic Assistance
• Foreign loans bridges saving
• Close the trade gap
• Provides greater employment opportunities
• Increase in productivity of various in real wages
• Provision of higher products
• Increase in tax revenue
• Donor Country and the economic Assistance self interest reason

10. SOURCES OF CAPITAL FORMATION
Voluntary saving
Involuntary saving
Government borrowing

11. RIDA ILYAS
GOVERNMENT POST GRADUATE COLLEGE FOR WOMEN LAHORE
ROLL NUMBER 1632