Causes of under Development
(i) Capital Deficiency:
Capital is of crucial importance for economic growth, but this is what the under-developed countries lack.
With the low level of national output much saving is not possible but whatever there is, it is frittered away in conspicuous consumption and extravagance in social ceremonies or is invested in real estate or jewellery.
Lack of sufficient capital handicaps all productive enterprise and inhibits economic growth. Such countries are caught up in a vicious circle of poverty explained below.
(ii) Lack of Entrepreneurial and Managerial Talent:
It is the bold and prudent entrepreneur and a wise manager who makes success of a business enterprise. Lack of this talent is responsible for missing available opportunities of profitable investment. Hence such countries remain economically backward.
(iii) Lack of Skilled Personnel and Technical Know-how:
Another very important bottleneck in the way of economic growth is the scarcity of technical know-how and skilled personnel. These elements of productive power take long in building up and foreign technicians are very costly. Hence, the underdeveloped countries remain under-developed.
(iv) Limited Size of the Market:
The purchasing power of the people is very low on account of their proverbial poverty. Hence the productive enterprises are handicapped in the sale of goods. Only an expanding market can provide a fruitful field for profitable investment and result in economic development of the country.
(v) Weak Infrastructure:
The backward countries lack an adequate and efficient means of transport and communications, a well-organised and developed banking system and adequate facilities for technical education. Without these no country can develop economically. Lack of adequate infrastructure is a big abstracted to economic growth.
(vi) Social and Institutional Set-up:
Social customs and attitudes of the people of backward countries are a great bar to economic progress. Conservatism, superstition, lack of ambition, undue regard for custom and status are a drag on economic progress. Economic backwardness in India is in no small measure due to joint family system, caste system, peculiar laws of inheritance and the other-worldly attitude of the people.
(vii) Alien Rule:
Most of these countries have been under foreign rule which has kept them down. The foreign rulers could not be expected to take any genuine interest in the economic regeneration of the people. Economic backwardness of India may be largely attributed to the policies followed by its British rulers.
(viii) Growing Population:
The explosive rate of population growth in the backward countries undoubtedly retards their economic growth. Whatever development fakes place is swallowed up by the rising tide of population. The fruits of development are hardly sufficient-to feed the torrent of babies.
(ix) Preponderance of Agriculture:
The bulk of the population is engaged in agriculture which is carried on in a primitive manner. Naturally the national income remains at a low level. Economic development cannot be brought about in the absence of rapid industrialization.
Major Problems of Economic Planning in Underdeveloped Countries
In the underdeveloped countries the adoption of economic is not being done in the spirit because there are many impediments and problems in its way.
- Planning is the Urgent Need:
Nobody can deny that planning is perhaps more necessary but more difficult to implement in underdeveloped economies.
The reason is that planning requires a very strong, efficient and honest administration.
But such a strong, efficient and honest administration does not exist in underdeveloped countries. In these economies the task of planning should be undertaken by the creation of a highly trained and disciplined class.
- Objectives before Planners:
The first objective of planners in UDCs should be to create an administrative machinery. The planners should see that the quantity and form of planning should be strictly in accordance with the administrative machinery. Moreover, the Government has to break much ground in doing normal expected functions before it can indulge in controversial subject which planning may involve.
- Backward Agriculture:
It has been noticed that in an underdeveloped country, depressed agriculture is the crux of the problem. As agriculturists are illiterate and backward, rapid economic progress may not be possible. But once the farmers are filled up with the desire to make progress, perhaps many difficulties may be overcome.
- Traditional agriculture vs. Modern Agriculture:
Another problem faced by agricultural economies is the small size of holdings. Agricultural progress is not possible unless the country goes through an agrarian revolution which contains work on large holdings with machinery. The success depends on how popular Government can awaken sufficient enthusiasm among masses to carry through such a revolution by consent. Unfortunately, intensive and large-scale farming requires fewer people per acre than the small holdings.
- Investment and Borrowing or Deficit Financing:
Unemployment is an other problem which an developed country faces. The problem cannot be solved by the creation of money alone, but large-scale Government activity is required. But the control of foreign exchange in itself may not solve the problem because the new money that is created will force the prices up.
In an industrial country, an increase in quantity of money is likely to increase employment and output which may not be the case in an underdeveloped or agricultural country, even where there is unemployment. An increase in the quantity of money as experienced in an underdeveloped country is generally likely to reduce output.