(a) Division of Labour—“The system of distributing a particular type of job to a particulars type of worker is known as specialization division of labour.” 

Advantages/Benefits to Producers: 

1. Increase in Production—With the specialization of labour, the workers become more skilled and efficient. They acquire higher speed in work, which ultimately results in moreproduction, quantitatively as well as qualitatively. 

2. Improvement in Quality—As the worker acquires greater skill in performing the work, the quality of the commodity produced is better. 

3. New Innovations—Consequent to the division of labour, the worker uses only one kind of machine and tool or attends to only one process of the total work continuously for a long period and hence he originates an entirely new idea, which sometimes results in a new invention. 

(b) Capital formation—“Formation of capital implies that society uses its present production not only for the satisfaction of its consumption but also uses a part of it on capital goods that is making machinery transport facilities or other production equipments.” 

Three causes of low capital formation in a developing economy: 

1. Low saving ability—The people in India have the desire to save and possess all those factors, whifh motivate the “will to save’, like old age considerations, family affection, social and political influence, but they have lower per capita income. Lower per capita income leads to low savings which lead to lower rate of capital formation. 

2. Habit of Hoarding—Most of the people have very little capacity to save, and are more in the habit of hoarding their savings in their houses, such savings are of no use as far as capital formation is concerned, because these hoarding cannot be utilized for any productive purposes. 

3. Taxation Policy: High level of taxes on property in India, affects the savings and accumulation of capital adversely.