The monetary arranging is gone for using the assets of the nation such that the pre-decided targets are accomplished. The real resources of a country consists of manpower, natural resources, skill, technology, raw material, capital goods and administrative and entrepreneurial abilities etc. In a money economy, all such are purchased against payment. Thus, to make payment for the purchase of resources, the purchasing power is required.
It is the level of financial resources which provides the purchasing power so that aims and objectives of the plan could be met. There are two sources of resource availability.
- Internal sources.
- External sources.
Internal resources :
The internal resources consist of real domestic savings. The internal savings may consist of private as well as public savings.The private savings may consists of personal savings as well as corporate savings. In case of UDCs like Pakistan the level of private savings is very low because of low incomes, international demonstration effect and reduced investment opportunities. Therefore, the need is to increase the investment opportunities by offering higher rate of interest, reducing the consumption, particularly the imports of luxuries be reduced and taxes be decreased. While the public savings depend upon the difference between govt.revenues or through decreasing unproductive expenditures. Moreover, the funds can be raised through printing new notes, or through borrowing from public, banks and central bank. Again, through raising the taxes or imposing new taxes the resources for the plan can be raised. But in case of UDCs like Pakistan, due to political and economic reasons the tax structure can hardly be changed. The new notes bring inflation. “While” the bank borrowing is furnished with the crowding-out. Because of these problems, to boost the funds for the plan the need for foreign assistance rises.
External resources :
The external resources play an important role in the developmental plan. The foreign aid is of two types:
- Non-Financial aid
- Financial aid
Non-Financial aid : The non-financial aid or physical aid consists of technical aid, commercial aid and commodity aid. While the financial aid consists of govt.loans, the loans from international institutions and agencies and international grants. But practically we find that the foreign assistance is of the least importance for the poor countries because:
- It is attached with the political interference and heavy interest charges.
- It is tied and can be used in certain fields only.
- It is not certain and sure
- It fails to coincide with the needs of country.
Where one finds that foreign aid is not sufficient, the country has to depend on private foreign borrowings and private foreign investment. But the multinational corporations also interfere in the host countries, exploit their labor and natural resources and take back the profits earned in the host countries rather reploughing there.
All the above discussion reveals that despite the problems attached with each type of resources of the plan, yet the country engaged in planning has to depend upon these resources.
SECTORAL ALLOCATION OR DETERMINATION OF PRIORITIES
The resources at the disposal of a country are always short of the requirements. Therefore, a plan is aimed at utilizing the resources in such a way that the maximum social benefits could be attained. In other words, because of paucity of resources all those objectives could not be realized what the planners keep in their minds. Accordingly, the plan formulators have to decide which projects to taken-up and which projects be postponed. In this way, the planners have to prepare a schedule on the basis of relative importance of the projects. Then a choice has to be made regarding allocation of resources amongst different uses. Normally, the planners have to make a choice in between the followings.
- Whether industrial sector be promoted or agriculture.sector? Whether more resources be allocated for energy or for means of communication?
- If industrial sector is to develop, then heavy industry be installed or light industry. Whether capital goods be produced or consumer goods with the help of industrial built-up? Whether export promoting industries be set up or import substituting?
- Whether private sector should play a greater role or public sector?
- Whether labor-intensive technology be adopted or capital-intensive technology?
- Whether the expenditures be made on productive activates or on social welfare promoting activities?
- Whether income should grow equally or unequally?
- Whether the country should follow the policy of self reliance or continue depending upon external resources?
- Whether the balanced growth be opted or unbalanced growth?
“If” we analyze the developmental plans of our country we find that in the 1st plan the priority was given to raise industrial production. While 2nd plan it was thought that private sector be given a variety of concessions so that industrial development could be initiated along with green revolution in agriculture sector. While in 3rd plan it was thought that in addition to development of agriculture and industrial sectors, more funds be also diverted in the provision of health, education, housing and clean water like activities.
The planners suggest that those poor countries who have plenty of labor and scarce capital should follow such a technique of production which could employ more labor. “While” the reverse is true in case of rich countries. Again the countries abundant in land should give top priority to agriculture.because they cannot afford industrialization. The poor countries should allocate more funds for the production of consumer goods. The countries who wish to earn sufficient amount of foreign exchange should give priority to the establishment of export goods industries. The countries where illiteracy, lack of information, deficient knowledge and lack of enthusiasm like factors exists, the planners should allocate resources in those fields which could broaden the outlook of the people, remove illiteracy and stubbornness, deficient knowledge and lack of zeal and enthusiasm.