ECONOMIC PLANNING IN INDIA

Introduction

In an economy there are lot of players and components in constant interaction with each other. Government sector has always played a vital role in the creation, regulation and distribution of goods and services in an economy. The government therefore comes up with a plan or strategy to perform and regulate the main functions in an economy of production, distribution, and consumption. It also is a value driven concept where the government ensures ideals of a welfare state like equity and socio-economic development of its citizens. Hence the aspect of economic planning becomes the broad framework of how the economy of a country functions and flourishes. Let us look at the planning system in India in detail in this chapter.

Planning Definition

Planning is deliberate choice of economic priorities and allocation of resources for achieving certain objectives in a given period of time.

“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 The Economic System As A Whole” – H.D. Dickinson

Planning under a democratic system may be defined as the technical coordination, by disinterested experts of consumption, production, investment trade, and income distribution in accordance with social objectives set by bodies representative of the nation. – Indian Planning Commission, 1949.

TYPES OF ECONOMY- PLANNED ECONOMY

It is an economic system where the government has control over the production and pricing of goods and services. In a planned economy, the government decides which goods and services to produce, the production and distribution method, and the prices of goods and services. Therefore, it is the central planner. Because the government sets and controls all aspects of business in a planned economy, there is no competition.

Market economy

 In a free market economic system, the economy is based on the powers of supply and demand with little or no government intervention. A market economy is fundamentally one where entrepreneurs are free to control and co-ordinate productive resources in order to pursue profit by creating outputs that are more valuable than the inputs they use up, and free to fail and go out of business if they do not.

 Market-oriented economies produce better economic outcomes but differ on the precise balance between markets and central planning that is best to provide Stability, Equity, And Long-Term Benefits. Therefore, there is an alternative model of mixed economy.

MIXED ECONOMY

A mixed economic system has features of both the planned and a free market system. A mixed economy is partly controlled by the government and partly based on the forces of supply and demand.  Most of the main economies in the world are now mixed economies, which operate under a mix of socialism and capitalism. Most mixed economies use fiscal or monetary policies to stimulate growth during economic slowdowns.

Generally, a mixed economic system involves a public and private sector. There is limited government regulation in a mixed economy. In the mixed economy, governments allow corporations to profit, but they will limit this through taxation or by imposing tariffs to control the macroeconomic factors.

Economic welfare is an important feature of mixed economy. It is achieved by both the public as well as the private sector. Public Sector seeks to avoid regional inequalities, provides large employment opportunities and often its price policy is guided by considerations of economic welfare rather than by profit motive. On the other hand, private activities are influenced through monetary and fiscal policies to make them contribute to economic welfare of the society at large level by production and distribution of resources. It boosts the consumption levels in an economy.