Resource Mobilisation PS

7/23/2019 Resource Mobilisation PS

1/27

SAVING AND INVESTMENT IN INDIA

&

RESOURCE MOBILISATION FOR

PLANNING


2/27

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.


3/27

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.


4/27

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.


5/27

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'


6/27

GROSS DOMESTICSAVINGS


7/27


8/27


9/27

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

= -


10/27

GROSS DOMESTICCAPITAL FORMATION

(GDCF)


11/27


12/27


13/27

SAVING INVESTMENT GAP


14/27

INFLOW OF FUNDS FROMABROAD


15/27

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


16/27

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


17/27

$easons of High IC%$

In India

estern /odel of 0rowth

Predominate Role of Pu(lic

Sector,atural Factors

Lac* of Political ill

Lac* of Loyalty andFaithfulness


18/27

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.


19/27

% &


20/27

So!"#$ o% P&anF'nan"#


21/27

Coon#n*$ o% Bd+#*a!R#$o!"#$


22/27

Io!*an* Coon#n*$ o%R#$o!"# Mo'&'$a*'on %o!N'n*., T#n*. and E/#n*. P&an$


23/27

Components of Budgetar& $esources


24/27

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


25/27

"mployment of unutilisedresources

0enerates additional resources

Com(ats Recession

Infrastructural evelopment Coping with increased demand

for money

avourable Impact of Deficit inancing


26/27

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


27/27

)*+,)- )$/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

Documents

Resource Mobilisation PS