Resource mobilization is a crucial aspect of economic development, particularly in a developing country like India. It refers to the process of accumulating financial resources to meet the needs of the economy, including infrastructure development, poverty alleviation, and overall economic growth. In India, resource mobilization encompasses both domestic and external sources, including taxation, savings, public sector undertakings (PSUs), foreign direct investment (FDI), and foreign aid. However, the challenges of mobilizing resources efficiently remain significant due to structural issues, economic inequalities, and bureaucratic inefficiencies. This analysis explores the various dimensions of resource mobilization in India, examining key schemes and policies implemented by the government to address these challenges, along with examples to illustrate their impact.
1. Taxation as a Tool for Resource Mobilization
Issue: Taxation is the primary tool for domestic resource mobilization, yet India faces challenges such as a narrow tax base, tax evasion, and inefficient tax administration.
Example and Scheme: The introduction of the Goods and Services Tax (GST) in 2017 was a landmark reform aimed at simplifying the indirect tax structure, broadening the tax base, and increasing revenue collection. GST subsumed multiple taxes and created a single, unified market, making it easier for businesses to comply with tax regulations. Although initially met with implementation challenges, GST has significantly contributed to increasing indirect tax revenues. For instance, GST collections crossed ₹1 lakh crore consistently in the fiscal year 2021-22, reflecting improved compliance and economic recovery post-pandemic.
2. Public Sector Undertakings (PSUs)
Issue: PSUs play a vital role in resource mobilization through dividends, disinvestment, and public-private partnerships (PPP). However, many PSUs are plagued by inefficiency, low profitability, and political interference, limiting their contribution to resource mobilization.
Example and Scheme: The government’s disinvestment policy aims to reduce its stake in non-strategic PSUs to generate funds. The strategic disinvestment of Air India in 2021, after multiple failed attempts, is a significant example. The sale of the loss-making national carrier to the Tata Group not only reduced the fiscal burden on the government but also mobilized resources for other critical areas. Additionally, the National Monetization Pipeline (NMP) launched in 2021 aims to monetize brownfield infrastructure assets held by PSUs, further augmenting resource mobilization.
3. Foreign Direct Investment (FDI)
Issue: FDI is a vital source of external resource mobilization, bringing in capital, technology, and management expertise. However, India faces challenges such as regulatory hurdles, inconsistent policies, and infrastructure bottlenecks that can deter potential investors.
Example and Scheme: The government’s “Make in India” initiative, launched in 2014, seeks to transform India into a global manufacturing hub by attracting FDI across various sectors. The initiative has resulted in a significant increase in FDI inflows, with India receiving $82 billion in FY 2021-22, making it one of the top destinations for FDI globally. The liberalization of FDI norms in sectors like defense, insurance, and retail has further facilitated resource mobilization.
4. Domestic Savings and Financial Inclusion
Issue: Domestic savings are crucial for resource mobilization, providing funds for investment and economic growth. However, India’s savings rate has declined in recent years, and a significant portion of the population remains outside the formal financial system, limiting the mobilization of resources.
Example and Scheme: The Pradhan Mantri Jan Dhan Yojana (PMJDY), launched in 2014, is a flagship financial inclusion program aimed at bringing the unbanked population into the formal financial system. The scheme has successfully opened over 450 million bank accounts, mobilizing savings from previously unbanked individuals. By linking these accounts with direct benefit transfers (DBT), the government has ensured that subsidies and welfare benefits reach the intended beneficiaries, reducing leakages and improving resource utilization.
5. Foreign Aid and External Borrowing
Issue: While foreign aid and external borrowing are essential components of resource mobilization, they come with challenges such as dependency, debt sustainability, and external influence on domestic policies.
Example and Scheme: India has traditionally been a recipient of foreign aid from multilateral institutions like the World Bank and Asian Development Bank. For example, during the COVID-19 pandemic, India received substantial financial assistance from these institutions to support its healthcare system and economic recovery efforts. However, India has increasingly focused on mobilizing resources domestically and has also emerged as a provider of foreign aid, especially to neighboring countries, reflecting its growing economic stature.
Conclusion
Resource mobilization is critical for India’s sustained economic growth and development. Through various initiatives such as GST, PSU disinvestment, “Make in India,” PMJDY, and strategic use of foreign aid, the government has made significant strides in mobilizing resources efficiently. However, challenges such as tax evasion, inefficient PSUs, regulatory bottlenecks, and the need for deeper financial inclusion persist. To overcome these hurdles, it is essential for India to continue implementing reforms, enhancing governance, and promoting a stable and investor-friendly environment. By doing so, India can ensure that it has the necessary resources to achieve its development goals and improve the quality of life for its citizens.