PLANNED ECONOMYMeaning FA A planned economy is an economic system where the government or a central authority makes decisions about what to produce, how much to produce, and for whom. It involves centralized control. state ownership of resources, and limited reliance on market forces. Examples include the former Soviet Union. Planned economies aim to achieve specific social goals but have historically faced challenges such as inefficiency and lack of innovation.Countries FA 1. Cuba: Cuba has a history of a centrally planned economy, although there have been some economic reforms. 2. North Korea: North Korea operates with a highly centralized and state- controlled economic system. 3. Vietnam: Vietnam has transitioned from a centrally planned economy to a Socialist-oriented market economy, but the government still maintains substantial control.Features A A planned economy is characterized by centralized economic planning and government control over Key aspects of production. distribution. and resource allocation. Here are some features commonly associated with planned economies: 1. Central Planning: The government or a central planning authority makes decisions regarding what and how much to produce, how resources are allocated, and the distribution of goods and services. 2. State Ownership: Key industries. resources, and means of production are often owned or controlled by +the state. Private ownership may be limited. 3, Fixed Prices: Prices of goods and services are typically set by the government rather than determined by market forces. 4, Production Targets: Specific production goals and targets are established by the central planning authority, outlining what needs to be produced and in what quantities.F S.Lack of Market Forces: Market forces of supply and demand have a limited role in determining production and consumption patterns compared to market-based economies. 6. Limited Consumer Choice: The range of available goods and services may be restricted. and consumers may have limited choices compared to market economies. . Emphasis on Equality: Planned economies often aim for greater economic equality among the population, reducing income disparities. 8. Long-Term Planning: Economic plans often extend over several years. emphasizing long- term goals and stability.WWAdvantages of planned economy A ‘Advantages of a Planned Economy 1, Social Equality: Planned economies aim to reduce income disparities and promote social equality by controlling wealth distribution 2. Stability: Centralized planning allows for long-term economic planning, providing stability and predictability in resource allocation. 3, Strategic Planning: The government can prioritize and allocate resources to strategic industries deemed essential for national development. 4. Public Services: A planned economy can prioritize public services such as healthcare, education. and social welfare, ensuring universal access. 5. Resource Allocation: The government can direct resources toward societal needs, addressing issues like poverty and, unemployment.Disadvantages of planned economy A, Inefficiency: Central planning can lead to inefficiencies as the government may struggle to accurately determine consumer preferences and allocate resources accordingly, 2. Lack of Innovation: Centralized control may stifle innovation, as there is less incentive for individuals or companies ‘to compete and innovate in the absence of market-driven rewards. 3. Bureaucratic Red Tape: The decision-making process in planned economies often involves bureaucratic layers, leading to delays and inefficiencies 4, Limited Consumer Choice: Consumers may have restricted choices as the government determines what is produced and in what quantities 5. Resource Misallocation: Central planning may result in the misallocation of resources, as decisions are not always based on market demand or efficiency. 6. Overemphasis on Goals: Governments may prioritize meeting production targets over consumer needs, leading to an imbalance in the production and consumption of goods.Why did India switch from planned to mixed economy? India's shigt grom a predominantly planned economy to a mixed economy was driven by various factors. The change began in ‘the 1980s and accelerated in the 1990s, Some Key reasons for this transition include: 1. Economic Crisis: In the late 1980s. India faced a severe economic crisis. including a balance of payments crisis. The country was grappling with high levels of external debt and a depleted foreign exchange reserve. These challenges necessitated a reevaluation of economic policies. 2. Liberalization Reforms: To address the economic challenges, India initiated economic liberalization reforms in 1991, These reporms, often referred to as the New Economic Policy (NEP) or LPG (Liberalization, Privatization. Globalization) aimed 40 open up the economy to foreign investment. reduce trade barriers. and encourage private sector participation 3. Globalization: The recognition of globalization as a growing economic trend influenced India’s decision to integrate into ‘the global economy. Opening up to foreign trade and investment hecame a Key aspect of India’s economic strategyF 4, Technological Changes: The rapid advancements in technology and communication further emphasized the need for India +o participate in the global economy. This shift allowed for the integration of technology and innovation into various sectors 5. Increased Productivity and Efficiency: The mixed economy model. combining planned and market-oriented elements, Was seen as a way to enhance productivity and efficiency by introducing competition and incentives for innovation. 6. Diversification of Industries: The government realized the importance of diversifying industries and reducing its direct involvement in every sector. This shift allowed for greater private sector participation and entrepreneurship. 7, Fiscal Discipline: The move towards a mixed economy also involved adopting more fiscally disciplined policies. reducing subsides. and promoting responsible economic management.YT es