Planning

 Planning may be defined as the conscious and deliberate

choice of economic priorities by some public authority.
 It is the making of major economic decisions—what and how
much is to be produced, and to whom it is to be allocated by the
conscious decision of a determinate authority, on the basis of a
comprehensive survey of economic system as a whole.
 The two main constituents of the concept of planning are:
 a system of ends to be pursued, and
 knowledge as to the available resources and their optimum
allocations.
 The main steps of planning
 Formulation of objectives or goals;
 Fixing targets to be achieved and priorities of production
of each sector of the economy;
 Mobilization of the financial and other resources required
for the execution of the plan;
 Creation of the necessary organization or agency for
execution of the plan; and
 Creating assessment machinery for assessing the progress
made.
 Forms of Planning
1. Authoritarian and Democratic Planning
In authoritarian planning, government is the sole
centralized agency, which draws the plan and implement it.
It is more comprehensive, systematic, rigid and efficient.

In democratic planning, the plan is prepared by an expert

body called planning commission which is outside the
government or the executive and is finally approved by
legislature which represents the people.

It is based on the system of free enterprise, but economic

activity outside the public sector is sought to be regulated
and guided indirectly by providing incentives for investment
through fiscal and monetary policies.
 Forms of Planning
2. Planning by Inducement and Planning by Direction
 Planning by inducement is often referred to indicative planning.
The state tries to manipulate the market by means of incentives
and inducements through price fixation, taxation and subsidies.
The government seeks to influence economic and investment
decisions by offering incentives to entrepreneurs via fiscal and
monetary policies but does not control or regulate directly the
functioning of the economy.

 Planning by direction is very comprehensive. It covers the entire

economy. There is complete concentration of economic authority
in the state. There is one authority, which is in sole charge of
planning, directing, and execution of the plan in accordance with
the pre-determined targets and priorities.
 Forms of Planning
3. Centralized and Decentralized Planning
 Centralized planning is done from the top. Each citizen, producer
or consumer has simply to carry out the instructions or the job or
duty assigned to him. The apex planning body makes centralized
plan. Central authority executes the plan through its subordinate
staff.

 In case of decentralized planning, plan is prepared from the

grassroots level. For instance, each village ‘Panchayat’ may be
asked to prepare a plan for the economic development of the
village and each industry may be asked to prepare its own plan.
Out of these plans, an integrated plan may then be evolved.
.
The lower government works as a coordinate not subordinate to
higher government in decentralized planning.
 Forms of Planning

4. Physical and Financial Planning

 In physical planning, the planning authority has to work out
how much land, materials, capital equipment will be required
to implement the plan and achieve the targets set out for it.
The targets are laid in physical terms e.g. so many tons of
steel, food grains, coal, etc.

 In case of financial planning, the planners determine how

much money will have to be invested in order to achieve the
pre-determined objectives or targets.