ECONOMIC PLANNING IN INDIA – 02
In socialistic countries, planning is comprehensive where planning authority decides about the investment in each sector. Planning authority fixes the prices of the products and factors. All it decides is what to produce and in what quantities to produce. As this planning is rigid, any deficiency in one sector would adversely affect the economy which cannot be corrected easily.
Indicative planning is peculiar to the mixed economy of France. But this is quite different from the type of planning which exists in other mixed economies. By mixed economy, we mean simultaneous working of public and private sector. It is the state which controlled the private sector in different ways, i.e. by quotas, price, licenses, etc. But under indicative planning, the private sector is not rigidly controlled to achieve the targets and priorities of the plan.
The state gives full assistance to private sector but does not control it. It, rather, directs the private sector in certain areas to implement the plan. This plan was used in France from 1947-50 as Monnet Plan. France’s experience shows that the firms do not play the game when development programme does not coincide with profit expectations.
Generally monopolistic firms do not bother about government policies and use their power for personal benefit. Same way under inflationary pressures, the government resorts to direct controls rather than maintaining prices mechanism through monetary and fiscal policies.
It refers to that where all economic activities and resources of the country operate under the direction of the state. The resources are optimally used by the state in order to achieve the targets of the plan. Consumer’s sovereignty is sacrificed under this type of planning. The consumers get fixed quantities at fixed prices. The government policies are rigid which cannot be changed easily. Any change can adversely affect the economy. This planning has two variants:
- Socialist system of Russia – All economic decisions are centralized in the hands of the state with collective ownership of resources
- Communist system of Erstwhile China – all resources to be owed and utilised by the state including labour.
Rolling plan was advocated by Prof. Myrdal for the development of developing countries. India experienced it for the first time in April 1978 under Janata Party rule and continued up to April 1980.
In the rolling plan, every year, three new plans are made:
(i) There is a plan for the current year which includes annual budget and the foreign exchange budget,
(ii) There is a plan for number of years say 3 to 5. It is changed every year keeping in view the needs of the economy,
(iii) A perspective plan for 10 to 20 years or more is presented where broader goals are stated. The annual plan is fitted into same year’s new 3 to 5 years plan and both are framed in the light of perspective plan.
Rolling plan is framed with a view to remove rigidities. It considers the unforeseen changes like natural calamities or economic changes. Under this financial and physical targets are revised. In this way, the rolling plan gives the benefits of both perspective and flexible planning.
But under rolling plan, long-term subjective cannot be achieved since the targets are revised every year. Such changes cannot maintain proper balances in the economy so as to achieve balanced development. Moreover frequent revision of the plan leads to uncertainties between both the public and private sectors. Further revisions of the targets make the attitude non-committal. This plan has been successful in Poland and Japan, but it failed in Mexico and Burma.
Fixed planning is for some fixed period, say four or five or six or seven years. A fixed plan fixes definite objectives which have to be achieved during the plan period. Physical targets and financial outlays do not change except under emergencies. Under this plan, targets are achieved which are laid down in the plan.
This plan helps in maintaining proper balance in the economy. Further, there is no uncertainty in this type of planning. Fixed plan, with given objectives, ensures public cooperation. This type of planning needs political will for its successful implementation.
This new concept was highlighted in the economic survey 2010-11. It was based on the rationale that the programmes run by the government should be able to connect well with the population and reaching the target population is the main aim of this type of planning. These programmes should be in line with the ethos, cultural values of the society for which it is targeted and benefit the users in the holistic manner. Eg. The development model followed by the newly established NITI Aayog is driven by this normative planning. Schemes like Swachh Barath targeting behaviour modification, Atmanirbhar Abhiyan etc are examples of this type of planning.