why does a country need to develop or aopt a system of allocation of resources?
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Answer:
the allocation of resources in developing countries assumes a great significance as capital is very scarce while the needs and aspirations of the people are very large. There is need for investment in agriculture to produce more food grains to feed the rapidly increasing population and more cash crops to fulfill the needs of raw materials for industrial growth. We require to invest in capital goods producing industries, in basic goods industries such as iron and steel, fertilizers, in numerous consumes goods industries and above all in infrastructure such as power, roads, highways, ports and airports.
Besides, more investment is required to be made in education and health which are now regarded as important drivers of growth. Given that resources are scarce, how much resources are allocated to each of these uses is a very difficult problem. No developing country can afford to take a leap in the dark and utilise its resources in a haphazard manner.
As a general rule it can be stated that we must make an optimum use of our economic resources. But the problem is how precisely to do it. It is necessary therefore to lay down certain criteria which should guide the allocation of scarce resources for planned economic development. What priorities should be given to various industries and projects so that not only rapid economic growth is achieved but also other objectives of planning are fulfilled. It is the pattern of investment allocation among different uses that will determine whether the paces of economic growth as well as its direction are such as we desire.