Importance of Economic

Planning / Development in

Pakistan

INTRODUCTION

There is no precise definition of economic planning which is acceptable to all

economists and political thinkers. The idea under-lying planning is a

conscious and deliberate use of resources of a community with a view to

achieve certain targets of production for the overall development of the

economy. As the targets of production and development are different in

different economies, so the definition of economic planning is different for all

economists. 
Prof. H.D. Dickinson defines economic planning as

The making of major economic decisions, what and how

mush 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 the economic

system as a whole. 

In developing countries, planning is considered an essential mean of guiding

and accelerating their development. The need for planning arises because

the market mechanism does not function well and efficiently in

underdeveloped nations. The problems of what to produce, how to produce,

for whom to produce and how to produce are not properly solved by price

mechanism. There is generally inefficient allocation of resources among its

many alternative uses.

In addition to this, the spill over benefits and costs (benefits obtained or cost

imposed without compensation by third parties from the production of other

parties) are not taken into consideration. There is also lack of information
and rapid changes in the economy. This leads to excessive uncertainties

about the economic events in the future. Considering all these conditions, it

is increasingly felt that price mechanism cannot be fully relied upon to

maximize growth in the economy.

The developing nations must adopt development planning to overcome

poverty. In developing countries of the world like Pakistan, there is a strong

and powerful swing towards planning. The importance of economic planning

can be looked from these perspective. 

1. Decisions of the Planning Authority are Superior  

The planning authority has a better insight into the economic problems of

the country. It can mobilize and utilize the available resources in the best

interest of its citizens. 

2. Coordinated Programme 

In a country there are millions of persons who are engaged in economic

activities for earning profit. The decisions taken by some of most of them

may be short sighted, irrational, self frustrating and socially disastrous. If

machinery is created to coordinate the working of the businessmen, the

economy can be set on the right lines and the country can progress at the

maximum possible rate of growth. 

3. Eliminating Business Fluctuations 

All the market economies of the world have faced and are passing through

various phases of trade cycle. The period of prosperity is followed by a

period of low activity. Planning has proved to be a powerful instrument in

eliminating business fluctuations. 

4. Reducing Economic Inequalities 

In the capitalist countries, the gap between the rich and the poor is

widening. This has created social bitterness and heart burning among the

have not. Planning has proved to be an effective weapon in reducing the

shocking inequalities in income. 

5. Provision of Job Opportunities 

With the aid of planning, the resources of country are utilized to the

maximum. All the able bodied persons are gainfully employed. There is also

security of income, tenure and employment. 

6. Elimination of Wasteful Competition 

Planning is also advocated on the ground that it eliminates wasteful

competition among the produces on advertisment, salesmanship etc. There

is also no duplication of staff and machinery as it is the market economy. 

7. Proper Distribution of Resources 

In the market economy, the resources of the country are utilized for the

production of only those commodities which yield more profits. The items

may be cream, powder, lipstick, fridge, car, cloth etc. In a planned economy,

however, will be proper distribution of resources, between the production of

essential and non-essential goods. 

8. Prevents Artificial Shortages 

In an unplanned economy, the industrialists and businessmen withhold the

supply of goods and create artificial scarcity with a view to making profits.

Planning discourages such malpractices and through planned production and

proper supply of goods, the prices of the commodities are not allowed to

fluctuate. The formation of trusts, cartels, patents, price agreement, market

sharing etc is completely banned. 

9. Keeping down the Social Costs 

In a market economy, the social costs which normally take the form of

industrial diseases, industrial accidents, smoke atmosphere, overcrowding,

cyclical unemployment etc. are passed on to the society as a whole by the

capitalists. By planning, it is possible to eliminate or keep down these social

costs by taking over the industries and extending the range of public
ownership into various sectors of economy. 

10. Creating Favourable Terms of Trade 

If the terms of trade are persistently unfavourable, it adversely affects the

rate of economic growth of the country. The state, through planning can

control the volume and direction of foreign trade, so that the terms of trade

remain favourable and the country moves rapidly on the path of economic

development. 

11. Making Major Economic Changes 

In a free enterprise economy the market mechanism fails to create major

economic changes such as industrial revolution, rationalization movement in

the country. The government measures facilitate, stimulate, guide and

control the means of production through planning. 

12. High Rate of Capital Accumulation 

As planning makes optimum allocation of a country's resources, it can,

therefore, secure for greater rate of capital accumulation than is possible in

a market economy. 

However, Pakistan is an under developed country and economic planning is

necessary to boosts its resources. This economic planning should be long-

term because annual economic development plans cannot offer satisfactory

results. That's the period of development plans is usually kept five years. All

developments plans of Pakistan are of five years. Except that twenty and

fifteen years perspective plans were also made

REFERENCES :

http://www.friendsmania.net/forum/b-com-part-1-pakistan-studies-notes/27007.htm

http://en.wikipedia.org/wiki/Five-Year_Plans_of_Pakistan