Ramesh Singh Test: Economic Planning - UPSC

A comprehensive plan sets targets to cover all major aspects of the economy, while a partial plan may go for setting such targets for a part of the economy (i.e., agriculture, industry, public sector, etc.). 

Taken broadly, the planning process itself can be described as an exercise in which a government first chooses social objectives, then sets various targets (i.e., economic targets), and finally organises a framework for implementing, coordinating and monitoring the development plan.

Planning is a process - It means planning is a process of doing something. Till we have some goals and objectives left regarding our lives, the process might continue. Planning is not an end in itself. As processes accelerate and decelerate, change direction and course, so also does planning. 

Planning must have well-defined goals - After the Second World War, several countries went for development planning. 

Trying to achieve a particular size of family for different countries came to be known as family planning. 

The process of providing suitable physical and social infrastructure for the erstwhile or the upcoming urban areas came to be known as town/urban planning. 

A country trying to optimise the use of its revenues for different categories of expenditures came to be known as financial planning. Financial planning is more popularly known as budgeting. Every budget, be it of the government or the private sector is nothing but an exercise in financial planning.

Many countries announced that they will be planned economies, yet some others didn't go for any such policy announcements. 

The Soviet Union, Poland, China, France, India are examples of the former category while the USA, Canada, Mexico fall in the latter category.

It was at the regional level that planning was used as part of the development policy by any country the first time. It was the USA which started the first regional planning.

The official experiment in the area of national planning is rooted in the Bolshevik Revolution of Russia (1917)—the Soviet Union. 

Dissatisfied with the pace of industrialisation, it was in 1928 that Joseph Stalin announced its policy of central planning for the Soviet Union.

The State Planning Committee, commonly known as Gosplan, was the agency responsible for central economic planning in the Soviet Union.

Numerical (i.e, quantitative) targets growth and development are set by the plan. For example, five lakh tonnes of steel, two lakh tonnes of cement, etc., will be produced/built in the coming 5 or 6 years. 

As the state controls the ownership rights over the resources, it is very much possible to realise the above-cited planned targets. 

Almost no role for the market, no price mechanism with all economic decisions to be taken in a centralised way by the state government. 

No private participation in the economy, only the state plays the economic role

Every economy following the indicative planning were mixed economies. 

Unlike a centrally planned economy (countries following imperative planning) indicative planning works through the market (price system) rather than replaces it. 

Side by side setting numerical/quantitative targets (similar to the practice in the imperative planning) a set of economic policies of indicative nature is also announced by the economies to realise the plan targets. 

The indicative nature of economic policies, which are announced in such planning, basically encourages or discourages the private sector in its process of economic decision making.