Economic Planning in India
Economic planning is the process of formulating and implementing a set of policies and programs to achieve specific economic goals. In India, economic planning has been a major feature of the country’s economic development since independence in 1947.
The first attempt to initiate economic planning in India was made in 1934 by Sir M. Visvesvaraya, who was a civil engineer and ex-dewan of the state of Mysore, in his book “The Planned Economy of India”. Visvesvaraya’s plan called for a ten-year development program that would focus on agriculture, industry, and infrastructure.
After independence, the Indian government established the Planning Commission to oversee economic planning. The first five-year plan was launched in 1951, and subsequent plans have been implemented every five years since then.
The main objectives of economic planning in India have been to
Promote economic growth and development
Reduce poverty and inequality.
Achieve self-reliance in agriculture and industry
Promote balanced regional development
The Planning Commission has played a significant role in achieving these objectives. The plans have helped to increase agricultural production, industrial output, and infrastructure development. They have also helped to reduce poverty and improve the standard of living for the people.
However, the Planning Commission has also been criticized for being too bureaucratic and inefficient. In recent years, there has been a move away from centralized planning towards a more decentralized approach. In 2015, the Planning Commission was replaced by NITI Aayog, which is a smaller, more agile body that is focused on advising the government on economic policy.
NITI Aayog has been tasked with promoting economic growth and development, improving the efficiency of government, and reducing poverty and inequality. It has also been given a mandate to promote innovation and entrepreneurship.
The future of economic planning in India is uncertain. However, it is clear that the government will continue to play a role in the planning and development of the economy. The challenge will be to find a way to balance the need for central planning with the need for flexibility and innovation.
In addition to the Planning Commission and NITI Aayog, there are a number of other government agencies and institutions that are involved in economic planning in India. These include the Ministry of Finance, the Reserve Bank of India, and the National Development Council.
The private sector also plays an important role in economic planning. Businesses and other organizations develop their own plans for growth and development, and they also contribute to the implementation of government plans.
Economic planning is a complex and challenging process. However, it is essential for the development of any country. India has made significant progress in economic planning over the past 75 years, and the country is poised to continue to grow and develop in the years to come.
Here are some of the key challenges facing economic planning in India:
Poverty and inequality: India is still a poor country, with a large number of people living below the poverty line. Economic planning needs to focus on reducing poverty and inequality.
Regional disparities: There are significant disparities in development between different regions of India. Economic planning needs to be used to promote balanced regional development.
Environmental sustainability: Economic development needs to be sustainable in the long term. Economic planning needs to take into account the environmental impact of development projects.
Globalization: The Indian economy is increasingly integrated with the global economy. Economic planning needs to be responsive to the challenges and opportunities of globalization.
Despite these challenges, economic planning has played a significant role in the development of India. The country has made significant progress in economic growth, poverty reduction, and social development. The future of economic planning in India is uncertain, but it is clear that the government will continue to play a role in the planning and development of the economy.
What is Economic Planning? Types and More
Economic planning refers to the development of a plan for future economic activities through the formulation of various policy measures. These actions are intended to align with predetermined economic objectives for the future.
For banking aspirants, knowledge of this subject is crucial for both the main examinations and interviews. Understanding economic planning and its background is relevant to being proficient in one’s work as a banker. Let’s delve deeper and understand what economic planning is, the different types of economic planning, and provide a brief overview of how economic planning is done in India!
What is economic planning? Since entering the field of economics, economists have given several definitions of economic planning. However, many agree that the most important one was prepared by Sir H.D. Dickinson.
After its inception by the Soviet Union, many countries adopted different levels of economic planning to achieve rapid development.
Types of Economic Planning Directive and Indicative Planning
In a socialist society, an essential component of direction-based planning is the complete absence of the market mechanism. In this type of economic planning, a central authority formulates, directs, and implements plans according to predetermined economic priorities.
On the other hand, indicative planning is more democratic in nature. It involves formulating plans by tinkering with the market. While there are no strict regulations, some degree of guidance is exercised through incentives. This type of planning allows enterprises the freedom to produce and consume.
Financial planning and physical planning
Financial planning involves the allocation of resources in terms of money. It is essential for balancing supply and demand and controlling inflation to ensure economic stability.
Physical planning, on the other hand, deals with the allocation of resources in terms of manpower, machinery, and materials. It ensures that obstacles are eliminated during the execution of the plan and that an overall assessment of available resources is carried out. This is seen as a long-term planning process.
Indicative and mandatory planning
Indicative planning is based on the principle of decentralization for the operation and implementation of plans. The private sector is involved in planning but is not entirely controlled or directed. However, they are expected to adhere to some degree of compliance through incentives.
In contrast, mandatory planning involves the complete control of all economic activities by the state. The government has absolute control over the factors of production. Private sectors are also required to strictly adhere to government policies and decisions, which can be quite rigid.
Rolling Plans and Fixed Plans
In a rolling plan, three plans are formulated and implemented every year. These include an annual plan, a five-year plan, and a 15-year plan, all of which are aligned with the objectives and goals set in the previous year’s plan.
In contrast, a fixed plan involves creating a plan for a specific period, such as 4, 5, or 10 years. It defines specific goals and objectives that must be achieved within a set timeframe. Except for emergency situations, annual objectives are met (as listed in the fixed plan).
Centralized and decentralized planning
Under centralized planning, planning is completely centralized under the central planning authority. This authority is entirely responsible for formulating and setting goals, objectives, and priorities for the plan. There is no economic freedom, and the entire economic planning process is under government control.
In contrast, decentralized planning involves planning at the grassroots level, with different administrative units providing input for the plan at both the central and state levels. State planning authorities prepare plans for districts and villages.
Economic planning in India In India, economic planning is conducted by the Planning Commission, which was replaced by the NITI Aayog (National Institution for Transforming India) on January 1, 2015. The NITI Aayog was established with the goal of achieving sustainable development objectives through cooperative federalism.
The history of economic planning in India goes back to the first attempt in 1934 by Sir M. Visvesvaraya, a civil engineer and former Dewan of the Mysore state, as documented in his book “The Planned Economy of India. Since then, from the establishment of the Planning Commission to the transition from 5-year plans to 15-year vision documents, India’s economic planning history has been quite intriguing.