Ramesh Singh Summary: Economic Planning - Indian Economy for UPSC CSE

DEFINITION

• 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 must have well-defined goals : After the Second World War. several countries went for development planning. As these nations had enormous socioeconomic hurdles, they first set some goals and objectives and then started their process of realising them via planning.
• Optimum utilisation of the available resources :
  (i) The way of utilising the resources.
  (ii) The idea of the natural resources which are available.

ORIGIN AND EXPANSION OF PLANNING

(i) Regional Planning :

• It was at the regional level that planning was used as a part of development policy by any country for the first time.
• It was the USA which started the first regional planning after the Tennessee Valley Authority (TVA) was set up in 1916—for a large-scale rehabilitation in south-eastern USA covering parts of seven states.
• With the primary aim of flood control, soil conservation and providing electricity, the TVA/the regional plan was also involved in many related activities such as industrial development, forestry, wildlife conservation, town planning, construction of road and rail, encouraging sound agricultural practices and malaria control in the defined region

(ii) National 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 collectivisation of agriculture and forced-draft industrialisation were other radical new policy initiatives announced by Stalin besides economic planning in 1928.
• The Soviet Union went for its first five y ear plan for the period 1928-33 and the world was to have its first experience of national planning.
• The nature and scope of Soviet planning (called the Gosplan) will have its direct or indirect bearings on all those countries which went for economic planning.

TYPES OF PLANNING
(i) Imperative Planning

• The planning process followed by the state economies (i.e., the socialist or communist) is known as the imperative planning.
• Such planning is also called as directive or target planning. Such planning had two main variants. In the socialist system, all economic decisions were centralised in the hands of the state with collective ownership of resources (except labour).
• Basic features of such planning are as under :
  (i) Numerical (i.e., quantitative) targets of growth and development are set by the plan.
  (ii) As the state controls the ownership rights over the resources, it is very much possible to realise the above-cited planned targets.
  (iii) Almost no role for the market, no price mechanism with all economic decisions to be taken in the centralised way by the state/government.
  (iv) No private participation in the economy, only the state plays the economic role.

(ii) Indicative Planning

• After the soviet planning commenced, the idea of planning got attention from the democratic world, neither state economies nor communist/socialist political systems, the nature of their planning was different from the command economies. Such planning has been termed as indicative planning by economists and experts.
• The identifying features of indicative planning may be summed up as under :
  (i) Every economy following the indicative planning were mixed economies.
  (ii) Unlike a centrally planned economy indicative planning works through the market (price system) rather than replaces it.
  (iii) Side by side setting numerical/quantitative targets a set of economic policies of indicative nature is also announced by the economies to realise the plan targets.
  (iv) The indicative nature of economic policies, which are announced in such planning, basically encourage or discourage the private sector in its process of economic decision making.

NITI Aayog

• In January 2015, the Government of India replaced the erstwhile body, Planning Commission, by the NITI Aayog. 
• The functions and guiding principles of the new body we come to know that India has officially moved towards normative planning—the new body has to follow a development model which is 'all round, all pervasive, all inclusive and holistic'.
• In this process the NITI Aayog has been further asked to enable the country to draw on the vitality and energy of the bedrock of our ethos, culture and sustenance