VICIOUS CIRCLE OF POVERTY

I. MEANING

The people in the less developed countries have low per capita income. Having low income their rate of savings is low. When savings are small in a country, investment will also be low. Low investment leads to low productivity. With low productivity level, the income is bound to be low. People as such remain poor. In the way vicious circle of poverty completes. Summing up, we can say that less developed countries are poor because they do not have sufficient capital resources for investment. Capital has a central position for economic development. A financially poor country is trapped in its own poverty. A country can get rid off from poverty if its rate of capital formation increases than the rate of population growth. So capital formation is the key to economic development by demand and supply of capital. DEMAND SIDE: The production of the poor country is low. The low production causes low per capita income and low purchasing power. The low purchasing power reduces the demand for products. Due to low demand, market will be limited. The small size of market discourages the investment. The low production reduces the productivity per worker. When the out put per worker is low, the per capita income is bound to be low. So vicious circle of poverty is complete on the demand side of capital formation. SUPPLY SIDE: In the developed countries due to low production, per capita income is low. The low level of income means the capacity to save is low. The low level of savings leads to low investment. The low rate of investment reduces the productivity per worker. It leads to low per capita income. The vicious circle is thus complete on the supply side of capital formation.

II.

DEFINITION

According to NURKSE,It implies a circular constellation of force tending to act and react upon one another in such a way as keep a poor country in a state of poverty. A country is poor because a country is poor

I. DRAWBACK
Low productivity in most sectors of the economy. Low degree of urbanization Prevalence of primitive and traditional methods of production and general technologies is backward Poor quality of human capital Inadequacy of communication and transport facility Dearth of innovative entrepreneurship

II. HOW TO BREAK VICIOUS CIRCLE OF POVERTY

Remaining poor is certainly no crime. The accepting of poverty and allowing it to continue is certainly a crime. Briefly, the vicious circle of poverty can be broken in developing countries including Pakistan by adopting following measures. (1) Increase in savings. The vicious of circle of poverty can be broken by making serious efforts in increasing the volume of real savings both at the level of in development the govt. The govt. can also mobilize foreign savings for capital formation country. (2) Higher per capital growth rate. The per capital growth rate should be higher than the rate of growth of population. This objective be achieved by increasing the level of employment in the country and reducing the rate of population growth. If the rate of increase in real per capital income is the same as the rate of growth of population, the real income per person will remain unchanged. (3) Efficient use of natural resources. The less developed countries (LDC) are not making the efficient use of the natural resources available to them. At present the multi national companies (MNCs) of the advanced countries are exploiting these resources more for their own economic benefits. The economic advantages of the natural resources must pass on to the benefits of the poor masses of the LDCs. (4) Employment of human resources. Many of the less developing countries including Pakistan are faced with serious unemployment problem. The quality of labour force is also poor. The low level of literacy, malnutrition, absence of proper medical care etc are all barriers to economic development. (5) Increasing the stock of capital goods. The LDCs can come out of the vicious circle of poverty if the wealthy class is motivated to make their savings available for investment in productive activates rather than using their wealth on the purchase of urban real estates, precious metals etc. (6) Technological advance. The people in less developed countries (LDCs) can break the poverty barrier by adopting and applying advance technologies which are appropriate to the resources available to them.

(7) Role of the advanced nations. The advanced nations can help the less developed countries in breaking the poverty barrier by: (i) Expanding volume of trade with them. (ii) Increasing the flow of private and public capital in basic infrastructure. (iii) Provision of direct aid in basic social sectors such as education, health etc. (iv) Provision of soft loans for development. (v) Writing off loans. (8) Role for the government. The government in the less developed country is in the key position to deal effectively with social institutional obstacles to growth and breaking out the vicious circle of poverty. It can greatly root out political corruption and bribery. It can provide incentives to save and invest. It can increase agricultural production by introducing effective land reforms in the country.

Importance of Rural Marketing

 Hindustan Motors (HM) launched a utility vehicle the RTV (Rural Transport Vehicle), aimed at the rural market. One way of meeting the intense competition in the passenger car segment by HM is through increased efforts in rural markets. It has over40% of this rural market, expoliting the low prices, reliability and time tested rugged aspect of the Ambassador brand. Titan industries the countrys largest watch maker is now set to aggressively woo the rural consumer. Titan intends to make in roads into the Indian hinterland with Sonata. The companys watches are available in towns with a population of 20,000. Rural consumers who come to larger towns have access to Titan products. 1. Untapped Potential:-Rural markets offer a great potential for marketing branded goods and services for two reasons. First one is the large number of consumers. A pointer to this is the larger volume of sales of certain products in rural areas as compared to the sales of the same products in urban areas. The second one is large untapped market which is yet to be discovered. 2. Market size and penetration:-The estimated size of Indias rural Market stated as the percentage of world population is 12.2 percentages. This means 12.2 percentage of the worlds consumers live in rural India. In numbers this works out to about 120 million households. In India the rural households form about 72 percentages of the total households. 3. Increasing income and purchasing power:-The agricultural development programmes of the government have helped to increase income in the agriculture sector. This in turn has created greater purchasing power in rural markets. The road network has facilitates a systemized product distribution system to village