25th September, 2016 (MAINS)

TODAYs ANSWER WRITING CHALLENGE FROM GS-III

Q1. “Domestic resource mobilization, though central to the process of Indian economic growth, is characterized by several constraints? Explain. [15marks/2012/GS-3] 150 words.

Please write answer in the comments section.

  • Dev Verma

    1. Economic growth depends on growth in capital formation, which in turn depends on investment. Domestic resources, with less conditionalities plays important role. Despite this, the mobilisation and channelising these resources is not improved as necessary.
    2. The Indian population, due to its size could have contributed more. However, lack of financial literacy, aversion to invest in complex instruments act as impediments in this regard. The high inflation sets off interest made and inflation linked investments are not available. Hence people are readily investing in gold and physical assets and thus the resources are locked up.
    3. The PSUs, sits on large amount of reserves are not investing speedily. The bureaucratic hurdles, lack of professionalism act as bottlenecks here. Thus the government’s share is shrinking.
    4. The bank network is not expanded to all the parts of country, where resources remain unutlitsed. The financial markets are not developed enough; they are confined to big cities.
    5. Large informal nature of economic transactions results in less tax collection. The generation of black money makes the money escape the economy.
    6. Thus there is lot of potential to tap the resources, which can spur the growth. This is much needed in these days of financial crisis.