The total in vest hie resources available at any in a country arc made of domestic savings and external resources which arc obtained from abroad in the of foreign capital. To sayings first. The aggregate ,savings of an economy consist of government savings, saving hey the business sector and savings by the households. Government savings arc the tax revenues minus public expenditure; the business savings arc the gross income of trade and industry minus the dividends and the taxes paid and the savings of the households arc the disposable income minus consumption expenditure. In India, in 1958-59, government savings accounted for 10.6 percent. corporate savings 3.5 percent and the savings of the household sector 85.9 percent
Broadly speaking, savings arc determined by the rate and pattern of growth and the institutional and social factors. In order to promote economic development, savings have not only to be generated but they have also to be mobilized to the maximum extent possible and then canalize them into productive investment. Tile conditions in the under-developed countries arc not very conducive to economic growth from the point of view of capital formation: The rate of savings is very low (about 5 per cent of the national income), the financial institutions to mobilize these savings arc not adequate; nor is the climate for investment favorable.
To finance capital formation and other development activities in the public sector is the responsibility of the Government. There arc various methods of financing development in the public sector. Willow to the shortage of voluntary savings, the McGovern arc often compelled to resort to the device of forced saving. Below we shall discuss each method of development finance. fur the public sector, one by one.