Capital and Economic Development
Chapter III
CAPITAL AND ECONOMIC DEVELOPMENT
Almost all economists lay emphasis on capital formation as the major determinant of ED. Capital is a man-made factor of production. It is the one of the essentials of development found in the form of liquid cash, raw materials, tools machines, building etc. Deficiency of capital is the basic characteristic of UDCs. It is not possible to raise the level of productivity unless more capital is made available. Hence it is useful to study the importance, sources and problems of capital formation.
MEANING OF CAPITAL FORMATION
Capital is regarded as produced means of production. It is considered as that part of wealth of a country which is utilized for further production of wealth. Capital includes all types of reproducible wealth that are used directly and indirectly in the production of large volume of output. It is man-made and its supply can be increased by human effort.
Different economists have been defined capital formation in different ways. Some of them are as follows:
According to Colin Clark, "capital goods are reproducible wealth used for purpose of production".
According to Nurkse, capital accumulation is a process of the "diversion of a part of society’s currently available resources to the purpose of increasing the stock of capital goods so as to make possible an expansion of consumable output in the future".
According to Singer, "Capital formation consists of both tangible goods like plants, tools and machinery and intangible goods like education, health, scientific tradition and research".
The same view has been expressed by Kuznets in these words, "Domestic capital formation would include not only additions to constructions, equipment and inventories within the county, but also other expenditure..........It would include outlays on education, recreation and material luxuries that contribute to
CAPITAL AND ECONOMIC DEVELOPMENT
Almost all economists lay emphasis on capital formation as the major determinant of ED. Capital is a man-made factor of production. It is the one of the essentials of development found in the form of liquid cash, raw materials, tools machines, building etc. Deficiency of capital is the basic characteristic of UDCs. It is not possible to raise the level of productivity unless more capital is made available. Hence it is useful to study the importance, sources and problems of capital formation.
MEANING OF CAPITAL FORMATION
Capital is regarded as produced means of production. It is considered as that part of wealth of a country which is utilized for further production of wealth. Capital includes all types of reproducible wealth that are used directly and indirectly in the production of large volume of output. It is man-made and its supply can be increased by human effort.
Different economists have been defined capital formation in different ways. Some of them are as follows:
According to Colin Clark, "capital goods are reproducible wealth used for purpose of production".
According to Nurkse, capital accumulation is a process of the "diversion of a part of society’s currently available resources to the purpose of increasing the stock of capital goods so as to make possible an expansion of consumable output in the future".
According to Singer, "Capital formation consists of both tangible goods like plants, tools and machinery and intangible goods like education, health, scientific tradition and research".
The same view has been expressed by Kuznets in these words, "Domestic capital formation would include not only additions to constructions, equipment and inventories within the county, but also other expenditure..........It would include outlays on education, recreation and material luxuries that contribute to