ADVERTISEMENTS:
In this article we will discuss about Resource Mobilisation during Different Plans. After reading this article you will learn about: 1. Domestic Budgetary resources including Taxation 2. Foreign Assistance 3. Deficit Financing.
Domestic Budgetary Resources Including Taxation:
Table 11.2 reveals that among the three major sources of plan finance, domestic budgetary resources contributed the major portion. The contribution of domestic budgetary re59Vr998 towards plan finance was 73 per cent during the First Plan and then declined to 56 per cent and 59 per cent during the Second and Third Plan but since then the contribution maintained a steady level of 74 per cent, 82 per cent, 78 per cent and 75.7 per cent during Fourth, Fifth, Sixth and Seventh Plan respectively.
Thus except for the Second and Third Plan, the contribution of domestic budgetary resource, towards plan financing varied between 73 and 82 per cent.
Taxation:
Among the domestic budgetary resources, taxation plays a very important role in mobilizing resources for plan. During first three plans, additional taxation alone contributed nearly 12.7 per cent, 22.8 per cent and 34 per cent of the public sector plan expenditure respectively. Same additional taxation further contributed nearly 27 per cent, 37 per cent, 22 per cent and 15 per cent during the Fourth, Fifth, Sixth and Seventh Plan respectively.
The importance of taxation in mobilising resources for plan can be visualised from the fact that tax revenue as a percentage of GNP has gradually increased from 7 per cent in 1950-51 to 20 per cent in 1987-88. Further, between direct and indirect taxes, the contribution of indirect taxes is much higher than that of direct taxes and proceeds from direct taxes are nearly 5 per cent of national income.
Further, the ratio of direct to indirect taxes declined from 39: 6 in 1950-51 to 14: 86 in 1987-88. Besides taxation, other sources of domestic budgetary resources such as public borrowing, small savings and surpluses of public enterprises are also contributing a good amount of resources for financing our plans.
Foreign Assistance:
ADVERTISEMENTS:
Table 11.2 further shows that the second important item—external or foreign assistance also contributed a good portion towards financing plans in our country. The dependence on external assistance which accounted for 10 per cent during the First Plan but gradually increased to 24 and 28 per cent during the Second and Third Plan but since then the dependence on foreign aid declined to 13, 15, 8 and 8.5 per cent during the Fourth, Fifth, Sixth and Seventh Plan.
Thus excepting Second and Third Plan the dependence on foreign assistance varied between 8 to 15 per cent.
Deficit Financing:
Third important source of plan finance is the deficit financing. As taxation and borrowing have got their limits thus deficit financing has been considered as an important source of finance for planning in our country. During the First and Second Plan 17 per cent and 20 per cent of total plan resources respectively came from deficit financing.
During both the Third and Fourth Plan 13 per cent of total resources was covered out of deficit financing, But due to adverse consequence of deficit financing through inflationary rise in the price level, the extent of deficit financing was reduced to only 3 per cent during the Fifth Plan.
ADVERTISEMENTS:
But due to resource constraint, the extent of deficit financing again rose to 14 per cent of total plan resources during the Sixth Plan (as against the original estimate of 5 per cent).
During the Seventh Plan also the extent of deficit financing again rose to nearly 16 per cent of the total plan resources as against the original provision of 7.8 per cent.
Thus knowing fully the evils of deficit financing, planners are still maintaining a high rate of deficit financing in the absence of increased tax revenue due to large scale tax evasion and negative contributions of public sector enterprises.
But considering double-digit inflation facing the country in recent years, it is high time that a total change in the system of plan financing be introduced where we should have more reliance on domestic budgetary resources and less on deficit financing and foreign assistance.
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