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7/23/2019 Resource Mobilisation PS
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SAVING AND INVESTMENT IN INDIA
&
RESOURCE MOBILISATION FOR
PLANNING
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Role of Saving and Investment.
Analysing Trends in Saving andInvestment in India.
Causes of Low rates of Saving andInvestment and Suggestions to Improvethem.
Plan Financing in India.
e!cit Financing and "#ternalFinancing.
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Saving: Definition
Saving$S% is the e#cess of income &ows$'%
over consumption &ows$C% during anaccounting year in the economy.
S=Y-C
Saving$S% can (e increased either (y raisingthe level of income or (y reducingconsumption in the economy.
In LCs it should (e raised (y raising the level
of income (ecause consumption level isalready low and it may dampen theinducement to invest.
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Investment: Definition
"#penditure on ac)uiring capital re)uiressavings.
Investment is funded through saving. Investment increases income.
Increased income ma*es larger savingspossi(le.
Investment is the e#penditure onac)uisition of production capacity.
Investment enhance production capacity(y adding to the stoc* of capital.
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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 smallbusiness establishments like local medicine shops and small
grocery outlets.B. Corporate Savings
Savings of the private companies Savings of the Corporate anks.
C. Public Sector Savings Savings of the departmental enterprises!like "#$, %ail&ays'. Savings of the non-departmental enterprises!like ()%, )ndian
(irlines etc. &hich are like private corporations'
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GROSS DOMESTICSAVINGS
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Investment in India
A. Investment(Capital ormation!
)ncrease in the stock of capital is called Capital *ormation
)nvestment +ccurs &hen saving is used for purchase of ne&
machines and tools, or for building of roads, factories,
po&erhouse etc. Capital *ormation includes (a' *ied Capital *ormation !b'
)ncrease in Stocks
Rate of Gross Capital Formation = Gross Investment x 100
GDP
Rate of Net Capital Formation =Net Investment x 100 NDP
= -
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GROSS DOMESTICCAPITAL FORMATION
(GDCF)
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SAVING INVESTMENT GAP
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INFLOW OF FUNDS FROMABROAD
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Causes of "o# $ate of
Capital ormation
Low Level of Savings
Population "#plosion
Consumerism
Ta#ation
Financial System
Interest Rate Structure
In&ationInfrastructural +ottlenec*s
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Suggestions to Increase $ate
of Saving and Investment
Increase in omestic Savings
"#pansion of +an*ing Institutions
Rural Savings
Rational Ta# Structure
Reduction in ,on-evelopment"#penditure
Price Sta(ilityLi(eral Policy
Increase in Productivity Standards
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$easons of High IC%$
In India
estern /odel of 0rowth
Predominate Role of Pu(lic
Sector,atural Factors
Lac* of Political ill
Lac* of Loyalty andFaithfulness
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inancing for Plans
Plan Financing refers to the SOURCES,
METHODS and POLICIES of thegovernment in regard to !nancial resourcesfor planned development of the country.
Planners are re)uired to stri*e a (alance
(etween the targets of the plans andresources re)uired to achieve those targets.
For every plan government draw a
comprehensive programmes for mo(ilisingre)uired resources.
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% &
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So!"#$ o% P&anF'nan"#
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Coon#n*$ o% Bd+#*a!R#$o!"#$
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Io!*an* Coon#n*$ o%R#$o!"# Mo'&'$a*'on %o!N'n*., T#n*. and E/#n*. P&an$
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Components of Budgetar& $esources
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Deficit inancing
/eeting therevenue de!cit ofthe 0overnment
(y issuing morecurrency
Rational of e!cit Financing-
Lac* of su1cient voluntarysavings
Ta#ation Socially unwarranted
e!cit !nancing is
discontinued as a source of
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"mployment of unutilisedresources
0enerates additional resources
Com(ats Recession
Infrastructural evelopment Coping with increased demand
for money
avourable Impact of Deficit inancing
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Changes in the pattern ofInvestment
Increase in money supply andPrice Level
Increase in Consumerism
+3P e!cit Price Rise and Ine)uality
Increase in the Cost ofPlanning
'nfavourable Impact of Deficit inancing
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)*+,)- )$/S
Rate of omestic Saving
Saving-Invetsment 0ap
+CR
AR/ 0ross domestic Capital Formation
Incremental Capital 3utput Ratio
e!cit Financing "#ternal Resource /o(ilisation
omestic Resource /o(ilisation
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