Degrading Capital Formation

The capital formation actually is a very important aspect of economic development. This means making and increasing of more capital goods, such as machines, tools, factories, buildings, raw materials, fuels, etc., which are to be further used in producing more goods.
The rate of capital formation in India is very low as compared to many advanced countries like U.S.A., Japan, Germany etc.
Some important reasons for lower rate of capital formation are as under:
  • Low Saving Ability
  • Habit of Hoarding
  • Inadequate Investment Channels
  • Insecurity
  • Lack of Allied Facilities and Infrastructure
  • Unequal Distribution of Income and Wealth

Measures which can be taken to improve the rate of capital formation in India are-
  • Encourage Savings
  • Tax Reforms
  • Facilitate Investment in Country's Assets
  • Maintainence of Proper Law and Order
  • Improvement of Basic Facilities
  • Cheap source of Capiatal Available
  • Various Channels of Investment Available
  • Equal Distribution of Income and Wealth

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