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Resource mobilisation is a broad term which includes raising and directing the resources (physical and human) of the economy to realise the desired socio-economic objectives. It involves all the economic policies activated by the governments—we can percieve it to be the very essence and the end result of the ‘fiscal policies’ of both the Centre and the states.
For Indian economy to move on the path of desired growth and development, the Government of India (GoI) needs to take care of the issue of resource mobilisation for various agents in the economy, namely –
1. GoI,
2. State governments,
3. Private sector, and
4. General public
In India, the responsibility of mobilising resources for the planned development of the country was given to the Planning Commission (PC). The commission used to take care of the fund requirements of the centre and the state governments. Practically, it was the PC which has to put in place the means by which the required funds for the planned targets of the economy were moblised. These plan targets are set by the GoI through the PC itself. The plan targets set by the states are also duly taken care of the PC in due course of this process. Though the effective responsibilities to moblise resources ultimately rests with the Ministry of Finance in which the various departments and divisions of the ministry play their diverse and highly focused roles.
1. GoI: To the extent GoI is concerned it needs funds to realise two categories of the planned targets, namely:
(i) Infrastructural targets (which chiefly include power, transportation and communication; in coming years so many other sectors got attached with it, for example, technology parks, urban infrastructure, etc.); and
(ii) Social sector targets (which includes education, health, social security, etc.—known as the Human Development related targets since 2010–11). These funds get mobilised through the Plan Finance- II Division of the Ministry of Finance.
2. State Governments: Other than the fund requirements of the GoI, the states also need funds for their developmental requirements (similar to the GoI)—they get the funds mobilised through three sources: firstly, through their own sources of income and market borrowings (after the recommendations of the 13th Finance Commission states are allowed to finance 25 per cent of their Plan Expenditure through market borrowing for which they do not need any permission from the GoI, provided they have effected their Fiscal Responsibility Acts); secondly, through the loans they get from the GoI on the advice of the PC (Ministry of Finance, GoI, shows these expenditures in the Plan Finance-I Division); and thirdly, through the GoI Central Sector Schemes, Centrally Sponsored Schemes and Additional Central Allocations (this includes the fund transfer to the states under ‘Special Category States’).
3. Private Sector: Other than the government, a large amount of fund is required by the private sector to meet their short-term (working capital) and long-term (capital market) requirements. The GoI needs to take care of this issue also—the financial system is managed in such a way that other than the government the private sector is also able to mobilise resources for its various requirements. This becomes even more important in a mixed economy, which is reforming and favours increased participation in the economy from the private sector.
This needs focused reform in the financial system as it was structured to channelise more funds and resources towards government needs before the reforms commenced. The main idea here is to prevent the governments from ‘crowding out’ the funds and let it flow smoothly towards the private sector—the process of reforms in the financial sector,
tax structure, fiscal policies of the Centre and states, etc., come under it.
4. General Public: Other than the government and the private sector, common people of an economy also need funds for their general spending and investment. The government needs to put in place such a fiscal policy which enables them (too) to have their access to funds. The savings common people do is used as investment provided they are able to save. Other than savings people, must get incentive and enough funds which they might directly invest in the primary or secondary security markets or in financial instruments (shares, bonds, mutual funds, pension funds, insurance, etc.). Common people are the main drivers of ‘demand’ in an economy. In the periods of reforms, the government sets twin targets—at the one hand promoting private sector so that ‘supply’ can be optimised in the economy (through ‘structural reforms’) and at the other it tries to create adequate ‘demand’ in the economy (by the process of ‘macro-economic stabilisation’).
The government used different ‘means’ to mobilise resources since Independence, in order to realise the desired and required kind of developmental goals. A part of resources are mobilised for investment purposes (i.e., the creation of productive assets) for which different ‘investment models’ have been tried by now.