State PCS

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Sources of Resource Mobilization in India

Sources of Resource Mobilization

Private Sector

Private sector resource mobilization is done via:

  • Cooperatives are groups of people who come together voluntarily to meet shared economic, social, and cultural needs through a jointly-owned and democratically-controlled enterprise. These organizations aim to fulfill the aspirations of their members in a collaborative and equitable manner.
  • Credit unions are financial cooperatives owned and democratically operated by their members. Their primary purpose is to promote thrift and provide financial services at competitive rates, fostering a sense of community and mutual support.
  • The FLA serves as the trade association for the consumer credit, finance, and asset finance sectors. Its diverse membership includes banks, subsidiaries of banks, building societies, as well as independent firms, all working together to shape and regulate the financial landscape.
  • Banks, as financial institutions, play a crucial role by accepting deposits from the public and creating credit to facilitate economic activities. They are a primary source of resource mobilization, contributing significantly to the financial well-being of individuals and businesses.
  • Angel investors, often friends or family, provide vital support to small startups and entrepreneurs. Their investments can be a one-time injection of capital or ongoing support, helping businesses navigate the challenges of their early stages.
  • SEBI registered venture capital funds like the India Innovation Fund focus on investing in innovation-led, early-stage Indian firms. Target areas include Information and Communication Technologies (ICT) and Life Sciences, promoting advancements in these critical sectors.
  • Venture capital involves private equity financing for small, high-potential firms in their early stages of development. VC firms take on the risk of investing in startups with the expectation of significant returns, contributing to resource mobilization and fostering innovation.
  • Capital networks cover the entire process of fund-raising, from finding investors to due diligence and exits. They serve as a comprehensive platform for connecting investors and entrepreneurs, facilitating the flow of capital in the business ecosystem.
  • Merchant banks specialize in international finance, providing business loans and underwriting for multinational corporations. While similar to investment banks, they do not offer regular banking services to the general public.
  • These companies play a key role in resource mobilization by offering services such as lending, letters of credit, factoring, and insurance in the context of international trade. Participants in trade finance include importers, exporters, banks, insurers, and other service providers, collectively supporting global economic transactions.

In India, there are specialized financial institutions, essentially banks, that focus on supporting specific economic and social endeavors. These institutions cater to various specialized activities, such as financing for small and cottage industries, providing support to insurance companies, extending financial assistance to commercial mortgage lenders, and aiding specialty equipment financing organizations. Among the key players in this domain are government undertakings like the Export-Import Bank of India, the Board for Industrial and Financial Reconstruction, the Small Industries Development Bank of India, and the National Housing Bank. Established with a dual objective of providing both financial and technical assistance, these institutions play a crucial role in bolstering Indian industries.

Public Sector

Tax Resources:

  • Individuals and businesses contribute directly to the government through income tax, payroll tax (including mandatory social health insurance contributions), and corporate or profit tax.
  • Taxes paid indirectly through a third party, like retailers or suppliers, are based on what households or companies spend. This category includes value-added tax, sales tax, excise tax on items like alcohol and tobacco, and import duties. The recent shift towards Goods and Services Tax (GST) consolidates many of these indirect taxes into a single, significant source of government revenue.
  • State-owned companies, particularly those involved in extracting natural resources like oil and gas, contribute to government revenue beyond traditional taxes.
  • When funds from foreign sources flow through recipient governments, it’s considered ‘public‘ external financing. This can play a crucial role in resource mobilization.
  • Understanding and encouraging savings and investments are vital aspects of resource mobilization. It reflects a proactive approach to building financial resources for the government’s needs.

Read Also: Need for mobilizing resource in an economy

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