Professional Documents
Culture Documents
Economic Planning refers to the path of actions in terms of policy measures to be followed in future in pursuance of
predetermined objectives. As defined by the planning commission, economic planning is the utilization of the country's
resources for development activities in accordance with national priorities. It is a conscious and judiciously carried out
process for optimum utilization of existing resources in order to fulfill some well defined objectives.
Types of planning
Planning can be categorized into various categories on the basis of the following:
1
broader goals are stated and the outlines of future development and forecast. It is a continuous planning process as
the plan is revised every year in the light of new information.
Rolling plan was introduced in India by the Janta Government in 1978 as the sixth Five Year Plan (1978-1983). But the
congress government abandoned it in 1980 and relaunched the sixth five year plan (1980-85) as a fixed plan.
(b) Fixed Plan
A fixed plan lays down definite aims and objectives which are required to be achieved during the plan period, say 4, 5,
6 or 7 years. Physical targets and financial outlays are seldom changed except under emergencies.
Economic Systems
The nature and scope of planning is largely determined by the nature of the economic system
in which it is practiced. Economies can be classified into the following categories:
1. Socialist Economy : It is characterized by the existence of public enterprise or state ownership of capital in all the
important spheres of the economic activity. All important economic decisions are undertaken by the planning authority.
Such economies generally pursue planning by direction or imperative planning. .
2. Capitalistic Economy : It is characterised by the existence of private enterprise and ownership of all important
means of production. Resources are allocated by the operation of the price mechanism by which' buyers and sellers
determine what goods and services will be bought and sold in the market, in what quantities and at what prices. Such
economies generally pursue indicative planning, as the role of planning authority and government is minimal.
3. Mixed Economy : It is characterized-by the presence of the features of socialism as well as that of capitalism i.e.
public sector co-exist with the private sector. Resources are allocated on the basis of the modified price mechanism,
that is on the basis of demand and supply with selective government intervention. Such economies generally pursue
planning by inducement i.e. government regulates the activities of the private sector through persuasive measures like
tax holidays, subsidies etc.
4. Communist Economy : It is an extreme form of a socialist economy in which all means of production are owned
and operated by the state and private property is not allowed. It is modeled on the notion of the Karl Marx i.e. "from
each according to his ability, to each according to his needs." Socialism is said to be the preparatory stage to the
attainment of a communist society but it has not yet established in any of the socialist country.
Core Plan : The concept of core plan enables the planning authority in formulating effective plans through realistic
assessment of the resources. Under a core plan, the Planning Commission asks the states to submit their projected
revenue estimates. On the basis of these estimates, Planning Commission determines the expenditure, heads for state
Annual Plans.
Planning in India
2
The era of economic planning started in India on April 1, 1951 when the First Five Year Plan was launched, since then
nine Five Year Plans have been completed besides seven years of break in the form of Annual Plans/The country has
now entered the Tenth Five Year Plan period.
The country has now entered the Tenth Five Year Plan period have been completed besides seven years of break in
the form of Annual Plans/The country has now entered the Tenth Five Year Plan period.
Planning Commission
The Planning Commission is an extra- constitutional and non-statutory body set up on 15th March, 1950 by a
government resolution. It was constituted as an advisory body to the Union Government for the formulation of plans.
The main function of the commission is to estimate the resources and to prepare a plan for the most effective and
balanced utilization of the country's resources. The prime minister is its ex-officio chairman. The tenure of its members
and vice-chairman is not fixed. There is no qualification for its members. The number of its members as well as their
appointment and removal depends on the discretion of the government.
Goals of Planning
Planning in India derives its objectives from the Directive Principles of State Policy enshrined in the
constitution. Goals and objectives of planning can be summerised into two categories i.e. short-term and long term
goals. Short term goals of a plan refers to the immediate and most important targets which a particular plan
endeavours to achieve. Such goals , are called focus of plan as they reflect the strategy of a particular plan. On the
other hand, long-term objectives of planning are the general guiding principles of the planning process and reflects the
aspirations of a welfare state. The long term objectives of planning in India have been more or less same in almost all
the Five-Year Plan and as follows:
(1) To accelerate the pace of economic growth in order to raise the standard of living of the people. That is to achieve
higher levels of national income and per capita income.
(2) To achieve self-reliance in respect of the production of foodgrains, development of basic industries, technological
know-how and foreign exchange earnings. It aims to eliminate
; vulnerability of the Indian economy to international pressures and disturbances.
(3) To ensure social justice to the people by eliminating , poverty, unemployment and inequalities of income and
wealth.
(4) To modernize the economy by bringing about structural and institutional changes in the framework of economic
activity.
Self sufficiency and self-reliance: Self sufficiency implies that a country produces all commodities it requires within the
country without having to import them while self -reliance implies that a country has sufficient foreign exchange
reserves to pay for its imports.
Review of Planning
5
FUNDING OF THE PLAN
Macroeconomic Parameters
S. Parameters Tenth Plan Eleventh Plan (Target)
No. (Actual)
1 Investment Rate (% of GDP) 32.4 36.7
2 Saving Rate(% of GDP) 30.9 34.8
3 Current Account Deficit(% of GDP) 1.5 1.9
4 ICOR 4.3 4.1
5 GDP Growth(% per annum) 7.8 9.0
ECONOMIC REFORMS
The entire period of economic planning in India can be divided into two different phases - the first phase
spreading over the plan period from 1950-51 to 1990; while the second phase commences from 1991. The first phase
laid down the basic objectives and strategies of development while the second phase showed a significant shift in the
original objectives and strategies of planning leading to economic reforms.
Economic Liberalization: It implies providing greater freedom to economic agents to take their
own economic decisions. It generally means leaving the economy to free market forces with least
government interference.
Privatization: It implies providing a greater role to private capital and enterprise in the functioning
of an economy
Globalisation: It implies increasing the integration of an economy with the world economy. It is
achieved by removing the restrictions on the movement of goods and services, capital,
technology and people across nations.
************************