Financing Economic Development
We understand that both the level as well as the composition of investment play a crucial role in the economic development process. However, it needs to be understood that investment contributes to the growth process by increasing the productive capacity, improving the technology, and enhancing the competitiveness of an economy. And when it is supplemented with investment in the social sectors, it also results in human development. The demand for investment depends on strong macroeconomic fundamentals comprising stability of exchange rates, fiscal prudence, feasible structure of financial market, including the regulatory and supervisory framework and the size and quality of the securities and bond markets, and continuity of a consistent investment policy.1 Two types of capital formation may be distinguished, viz., physical capital and human capital. Since there are significant differences between private and social profitabilities in the social sectors, an optimal level of investment in human resources would depend on the perception of and the decisions taken by the policy-makers to bridge the gap between the two types of profitabilities. Nevertheless, implementation of an investment decision, whether related to physical or social investment, is contingent on the availability of sufficient domestic and external investible resources.
Volume (Year): 39 (2000)
Issue (Month): 4 ()
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