Resource Mobilization
The Government of India has taken measures in the form of disinvestment, relaxing FDI standards, implementing new tax and borrowing laws and regulations to mobilise capital for the country's growth. Railway passenger fares have recently been increased on the advice of the Bibek Debroy Resource Mobilization Committee for major railway projects and the restructuring of the rail ministry and railway board.
History
> Resource Mobilization is the identification, organization and utilization of the available material resources within the country (including financial resources) to further its objectives of development missions and plans.
> Every country has economic resources known as domestic resources within its territory. But they may also not be usable for mutual use. The percentage of resources used is always very low as compared to the capacity. Identification and mobilisation of its resources is important for a country to develop.
Types of India's resources:
Two types of resources exist:
- Natural Resources- Coal, petroleum, natural gas, water, spectrum, etc.
- Human Resources- A nation's labour force and intellectual power.
ANALYSIS
Why is Mobilizing Resources so Important?
> It is beneficial in ensuring organisational sustainability.
> It paves the way for change in the facilities and goods available.
> It facilitates the growth of the goods and services of the company.
> It is crucial to any organizations existence, as any organization, be it in the public sector or private sector, must continually generate new business to maintain a perpetual presence.
> The correct use of these resources contributes to the production of economic resources, such as investments, venture capital, taxes, etc.
Natural Resources Mobilization:
> India, while a country with ample reserves, is importing coal and iron because of policy bottlenecks. Thus, our current account deficit is rising.
> India faces technical barriers to exploiting some of its natural resources as well.
> India also suffers from domestic causes, such as political causes, tribal resistance, inter-state disputes, conflicts with neighbouring countries, etc.
Human Capital Mobilization:
For India's growth, organising human capital for ready use is important. In reality, as a nation of 125 crore individuals, India is now focusing more on its capacity for human capital. Also in support of India is its demographic dividend.
> Human resource mobilisation illustrates the need to motivate human capital. It is important to bring weaker parts into the mainstream, such as women, youth, SC , ST, OBC, etc.
> Adequate work opportunities for human resources should be provided, and professional development programmes should be introduced where there is a shortage of expertise in the job requirements.
> Use the demographic dividend.
> India is currently leveraging its technologists, engineers, physicians and scientists.
Financial Capital Mobilization:
> More goods and services should be generated if a country wants to expand. Output can be carried out by the government, the private sector or in the PPP mode. But for that, a country's economic capital should be mobilised.
> In India, domestic investment is lower, despite a strong savings rate. Indians invest in less profitable commodities, such as gold and durable consumer goods. There should be more investment in agriculture, manufacturing or services if India wants to expand.
> There is far less tax collected in India. There is a need to expand the tax base.
> Four development factors should come together: property, labour, capital and organisation. An climate for development and investment should be there.
> Organisations are not "spontaneously growing" but need capital to be mobilised.
> These tools are more 'free-flowing' in contemporary capitalist society and are easier to mobilise than in more conventional societies. Many variables affect the organisation's growth.
> Initial Resource Mix: A starting organisation has different resource needs (technology, labour, resources, organisational structure, social support, legitimacy, etc.). But there isn't always the right combination of resources available.
> An organisation's most valuable resource is its members.
> More savings and more spending in efficiency.
How does public and Private sector mobilize domestic resources?
> Resources are mobilised in two ways by the public sector:
- The Taxes
- Public revenue production for social care and infrastructure investment.
> The private sector uses the following forms to mobilise resources:
-- The private sector, through financial intermediaries mobilises the assets of households and businesses and allocating these resources to investment in productive activities.
ISSUES WITH RESOURCE MOBILISATION
> Restricted domestic Public resources:
-- Makes LDCs highly dependent on external resources, restricting their policy space and creating some dependence.
-- Their economic weakness is compounded further by indebtedness.
> Poor Fiscal policies and domestic taxation:
-- In developed countries, fiscal discipline is rarely seen. To achieve growth, they often resort to deficit funding.
-- Taxes are not broad-based, and tax avoidance is widespread in developed countries where public spending opportunities are squeezed.
> Lack of National and sub-regional development banks with rural penetration:
-- While India enjoys the presence of large national and international banks, there has been a fallacy about financial inclusion at the rural level.
-- Moreover, 2008 financial crisis brought national development banks back onto the policy agenda, as countries sought sources of long-term financing to stimulate economic recoveries, and there is greater international acceptance of such banks. However, poorer and smaller developing countries may face greater obstacles in setting up such banks, due to funding and technical constraints.
> Illicit financial flows from developing countries:
-- Illicit financial flows include resources that have been unlawfully acquired, transferred or used.
-- The detection of flows deemed potentially harmful to economic growth is a common concern with respect to illegal financial flows from developed countries.
-- Critical development resources are being lost in developed economies because of the ease with which capital flight can thrive in the sense of an emerging yet opaque international financial system and the fact that illegal capital flows from developing economies are closely linked to this is reflective of the deeper systemic problems of political governance in these countries.
-- Concerns over illicit financial flows therefore reflect a range of relevant policy concerns, yet underlying analytical frameworks and empirical methodologies continue to be the subject of debate. Illicit financial flows need not be illegal if relevant legal frameworks do not adequately reflect wider public social and economic interests or do not cover such flows.
> Tax cooperation internationally:
-- In recent years, fighting illegal financial transactions has been a primary driver of international tax cooperation.
-- In general, international tax cooperation is of particular significance in the world of hyperglobalization, where tax structures in some countries may have an effect on the collection of public revenue in other countries.
- Such cross-national effects can result from tax evasion, for example if high net worth individuals place financial assets in tax havens, as well as from illicit financial flows arising from the creative accounting or transfer pricing practices of multinational enterprises.
> Lack of Multilateral development Banks:
- Financing needs to support the achievement of the Sustainable Development Goals are considerable.
- Lack of financing is not due to a shortfall in global savings; at the global level, institutional investors currently have assets under their management totalling $115 trillion. Most are in the form of developed country securities and other assets that offer low returns.
-- Thus, it is important for multilateral development banks and other international banks, current and new, to bridge funding from end-savers to development projects. In this way, development banks may play a key role in development by directly providing long-term financing from their sources of funding, by tapping into new sources and by leveraging additional capital, including private ones, by co-financing projects with other partners.
Why is Domestic Resource Mobilization (DRM) relevant in particular?
In low-income countries confronting widespread poverty, mobilizing domestic resources is particularly challenging, which has led developing countries to rely on foreign aid, foreign direct investment, export earnings and other external resources. Nevertheless, there are compelling reasons to give much more emphasis to DRM.
> Greater dependence on DRM is necessary to enhance economic growth, accelerate poverty reduction and promote sustainable development.
> In order to fund public and private spending, high-growth economies usually save 20-30 per cent or more of their profits.
> DRM is theoretically more congruent than foreign capital with domestic ownership.
> International assistance is invariably restricted and conditional.
> FDI is mainly geared towards the investor's economic goals, not the host country's key development priorities.
> DRM is more stable than aid, export earnings, or FDI, and less unpredictable.
CONCLUSION:
Resource in the form of investment is the most important factor affecting growth. Hence, resource mobilization to boost investment has always been a priority. The task of mobilizing resources involves deliberate decisions on selection of major investments, control of expenditures, monitoring of performance and realization of planned level of economic activity. In addition, it also covers tax evasion prevention and tax avoidance.