I

NDI
ANECONOMY 
1950-
1990 
(Par
t-1)

Whati
smeantbyEconomi
cPl
anni
ng?

Economicplanni
ngi sapr
ocessoratechniquewhichuti
li
zes t
heeconomicr
esourcesofthe
count
ryi
ntodevelopmental
 acti
vi
ti
esinaccordancewit
htheaimsandobject
ivesdetermi
nedby
thepl
anningcommi ssi
onandtheseobject
ivearetobereali
zedwi
thi
naspecifi
edperiodoft
ime.

Thepl
anningcommissi
onwassetupon15Mar
ch1950.Thechai
rper
sonofpl
anni
ng
commi
ssionwasthepri
meMini
ster.

NEEDFORECONOMI
CPLANNI
NG

Theconceptofeconomi
cpl
anni
ngbecomei
mpor
tantf
orI
ndi
asi
ncei
ndependenceont
he
f
oll
owinggrounds:

1.Planni
ngi snecessar
yf orthebal
ancedproduct
ionofbothessent
ialandi
nessent
ialgoods.
Sinceresourcesarescarce inever
ycountr
y,ther
eforeplanni
ngbecomesnecessaryfora
balancedproducti
onofalltypesofgoodsand ser
vicesinthecount
ry.

Iftherewerenoplanninginthecount
rythen,gui
dedbyprofi
tmotivepri
vat
eproducerswoul
d 
uset hescarcer
esourcesofthecountr
yintheproduct
ionofthosegoodswhichearneda 
higher pr
ofi
tint
hemar ket
.Thi
swouldresulti
nanunbalancedproduct
ionandconsumpti
on
pat t
erni
nthecountry.

2.Pl
anni
ngbecomes necessaryforincr
easi ngthelevelofsavi
ngandhencecapi
talf
ormat
ion
i
nthecountr
y.Theprocessofsavi
ngandi nvestmentiscapit
alf
ormati
onwhi
chisthekey
el
ementfort
heeconomicgrowth.Iti
sdomest i
csavinginthecountr
ywhichi
smobili
sedfor
i
nvest
mentpurposesandthi
sisadet erminantofeconomi cgrowth.

Ifther
ewer enoplanningint
hecount
ryorabsenceoff
orced savi
ngint hecount
rythenlow
l
evelofsavingandi nvest
mentwoul
dhaveadversel
yaff
ectedthelevelofeconomicgrowth
sinceIndependence.

3.Planningbecomesnecessar yforthedevel opmentofsuppor ti

ngser vi
ces(l
ikeinf
rast
ruct
ure)
i
nthecount ry.Thedevelopmentofec onomi cinfr
astruct
urerequir
eshugei nvestmentandthe
ret
urnsont hese proj
ect
saresl owtherefore,guidedbypr ofi
tmotive,pri
vatei
nvestorswould
nothavedevel opedthi
sform ofinf
rast
ructure.Mor eovergrowthanddevel opmentofsocial
i
nfrast
ructur
ei smoreguidedbywel far
ethanpr of
it
.

I
nt heabsenceofplanneddevelopmenti
nthecount
ryther
ewouldbeanunbalancedgr
owt
hof
economicandsocialinf
rast
ruct
urei
nthecount
rywhichret
ardst
hepaceofeconomicgr
owt
h.

4.Pl
anni
ngi
snecessar
yforachi
evi
ngr
egi
onal
equal
i
ty.

I
nt heabsenceofeconomicpl
anni
ngandgovernmenti
nter
vent
ion,backwar
dstatesifl
eftt
o
i
tselfwoul
dfai
l t
odevelopandthi
swoul
dincr
easeregi
onaldi
spari
ti
esinthecountr
y.
TYPESOFECONOMI
CSYSTEM (
Ref
ert
oBox2.
1)

1.CAPI TALISM:Suchaneconomi csystem i

stermedasamar keteconomyoranunpl anned
economy.I nthiseconomic system t
hemeansofpr oduct
ionareownedandcont r
oll
edbyt he
i
ndivi
dualandeconomi cdecisionofproduct
ionandpr i
cesaredeterminedonthebasisof
marketforcesi.e.for
cesofdemandandsuppl y.Insuch aneconomi csyst
em pr
ofi
t
maximizati
oni sthemainmot iveoftheproducer.Theref
oresuchaneconomyi sabletoac hi
eve
theobj
ectiveofhi gherr
ateofgr owt
h.

2.SOCI ALI
SM: Thi
seconomi
csystem i
sal sot
ermedasapl annedeconomywhereeconomic
decisi
onsaretaki
ngbytheCentr
alPlanningAuthor
it
y.I
nsuchasyst em t
hemeansof
producti
onareownedandcontr
oll
edbyt hegovernmentdi
rectl
ywhichworksf
or soci
alwel
far
e
ofit
speople.

3.MIXEDECONOMY:Suchaneconomi csystem i
sabl endormixt
ur eofcapit
ali
sm and
soci
alism.Here economicdecisi
onsaretakenbythePlanningCommi ssi
onintheint
erestof
publi
cwel f
areandpr i
vatesect
oracti
vi
ti
esarecontr
oll
edandr egul
atedbyt hegovernment.Indi
a
adoptedtheconceptofmi xedeconomytoachievetheobject
iveofhigherrat
eofeconomi c
growthandsocialjust
icefort
hispeopl
esimult
aneously.