Economic Planning

What is Economic Planning?

Economic planning is the making of major economic decisions; what and how much to be produced and to whom it is to be allocated by the conscious decision of a defined authority, on the basis of a comprehensive survey of the economic system as a whole.

From the above, we can say that economic planning requires the adoption of measures on production, distribution, investment etc. in various sectors of an economy so that economic development takes place.


Stages of Economic Planning

The following stages of economic planning are as follows:

  1. Formulation
  2. Adoption
  3. Execution
  4. Evaluation

Formulation

The first stage in planning is the formulation of the general objectives of the plan and their definition in specific quantitative terms. The task of the formulation of the general objectives of the economic plan in India was generally performed by the Planning Commission alone.

It was the function of the Commission to formulate a plan for the most effective and balanced utilization of the country’s resources. NITI Aayog has now replaced the Planning Commission.

Adoption

The adoption of the plan is the function of either the Parliament or the Government. As soon as the Plan is adopted by the Parliament it acquired the force of law and becomes the statutory obligation of the government to execute.

Execution

The execution or implementation of the Plan is the responsibility of the central and state governments in their respective spheres. The various Government departments or agencies are entrusted with the operation of executing the Plan.

Implementing a plan is more difficult than making it. Making a plan is an exercise of imagination, while implementation is a struggle with reality.

Evaluation

One of the functions of the Planning Commission was to appraise from time to time the progress achieved in the execution of each stage of a plan or recommend the adjustment of policy and measures that such appraisal might be necessary. Planning cannot be regarded as good unless it takes into account the course of the fulfilment of the plan.

Planning is no more filing up tables or figures unrelated to the course of fulfilment of the plan. The supervision of the plan needs an independent body of experts unconnected with plan formulation or plan execution.

This body of experts should evaluate plan fulfilment in a strictly impartial manner. It should bring to the notice of the government the failures and shortcomings which it notices in the course of its evaluation.


Features of Economic Planning

Economic planning is very essential as it provides the road map towards the accomplishment of economic goals. It takes into account the basic premises and based on that works out the modalities for all-around economic development. Following are the features of economic planning.

  • A planned economy requires a coordinated picture of the entire economy. In India, the Economic Surveys, National Sample Surveys etc. provides the basic inputs required for the formulation of economic plans and budgets.
  • It is more egalitarian as it protects the interests of the weaker sections of society. Separate plans are made for the development of drought-prone areas, backward areas, areas inhabited by the SC/ST population etc.
  • It is one that safeguards the future interest of the economy. In the absence of economic planning, the country or the state will be quite vulnerable to future changes in the economic environment.
  • It is more rational as it eliminates waste and emphasizes the essential elements of the economy.
  • It works for optimum utilization of resources and efficient working of the economic system.
  • It is time-bound. In our country, we had a five-year planning regime. We have a system of yearly budgets.

Objectives of Economic Planning in India

In a developing country like India, economic planning is playing a very important role in its economic development. The fundamental objective of planning for our country is to accelerate the pace of economic growth and to provide justice to the general masses. “Growth with Social Justice” can be considered the main guiding objective of economic planning in India.

In view of the above, the major objectives of economic planning in India are as follows:

  • Attainment of a higher rate of economic growth for the country
  • Reduction of economic inequalities in different regions of the country
  • Creation of employment opportunities
  • Economic self-reliance by having own production and lesser dependence on other countries. The balance between imports and export is an important aspect.
  • Modernization of various sectors like agriculture, industries, services etc. by upgrading facilities.
  • Redressing the imbalances in the economy across strata of population and regions.

Five Year Plans of India

Five Year Plans in a chronological manner are as follow:

  1. First Plan 1951 to 56
  2. Second Plan 1956 to 61
  3. Third Plan 1961 to 66
  4. Fourth Plan 1969 to 74
  5. Fifth Plan 1974 to 79

First Plan 1951 to 56

Community Development Program was launched in 1952. It emphasized agriculture, power, price stability and transport. It was more than a success, because of good harvests in the last two years of the Plan.

Second Plan 1956 to 61

This Plan was also called Mahalanobis Plan after its chief architect. Its objective was rapid industrialization. It advocated huge imports which led to a shortage of funds leading to foreign loans. It shifted basic emphasis from agriculture to industry. During this plan, the price level increased by 30%, against a decline of 13% during the First Plan.

Third Plan 1961 to 66

At its conception time, it was felt that the Indian economy had entered a take-off stage. Its aim was to make India a ‘self- reliant’ or ‘self-generating’ economy. Also, it was realized from the experience of the first two plans that agriculture should be given the top priority to suffice the requirement of export and industry.

Fourth Plan 1969 to 74

The main emphasis of this Plan was on the agricultural growth rate so that a chain reaction could start. It fared well in the first two years with record production but in the last three years, there were failures because of poor monsoon. The country had to tackle the influx of Bangladeshi refugees before and after the 1971 Indo-Pak war.

Fifth Plan 1974 to 79

The Fifth Plan proposed to achieve two main objectives viz, ‘removal of poverty’ (Garibi Hatao) and ‘attainment of self-reliance through the promotion of a high rate of growth, better distribution of income and very significant growth in the domestic rate of savings.


FAQ Related to Economic Planning

What is Economic Planning?

Economic planning is the making of major economic decisions; what and how much to be produced and to whom it is to be allocated by the conscious decision of a defined authority, on the basis of a comprehensive survey of the economic system as a whole.

Explain the First Five Year Plan

The first five years plan was introduced in 1951. It emphasized agriculture, power, price stability and transport. It was more than a success, because of good harvests in the last two years of the Plan.

What were the Objectives of Fifth Plan 1974

The Fifth Plan proposed to achieve two main objectives:
1. Removal of Poverty
2. Attainment of self-reliance through the promotion of a high rate of growth
Or other objectives were a better distribution of income and very significant growth in the domestic rate of savings.

why Economic Planning is Important

Economic planning is very essential as it provides the road map towards the accomplishment of economic goals. It takes into account the basic premises and based on that works out the modalities for all-around economic development.

What are the Main Objectives of Economic Planning in India?

The fundamental objective of economic planning in India are as follow:
(a) Attainment of a higher rate of economic growth for the country
(b) Reduction of economic inequalities in different regions of the country
(c) Creation of employment opportunities
(d) Economic self-reliance by having own production and lesser dependence on other countries
(e ) upgrading various sectors like agriculture, industries, services etc.

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