Get the answer of: What is Economic Planning?
The fundamental purpose of economic life is the satisfaction of human wants which are basically unlimited. All the economic activities of any modern society are directed towards satisfying human needs with limited (scarce) resources.
The limitation of resources forces society to make choice and allocation. Economic resources are scarce in relation to the demands for their alternative uses. The primary economic problem is the allocation of scarce resources to satisfy human wants in an manner that brings maximum satisfaction.
And economic planning, writes B.C. Tandon, “means arrangement of resources which are scarce in relation to the needs for their alternative uses in such a way that the satisfaction yielded by them is maintained at an optimum level. It thus involves the element of choice between scarce means of achieving a pre-determined end. It is a carefully thought out rational arrangement of economic resources”. L. Robbins says: “To plan is to act with a purpose, to choose, and choice is the essence of economic activity”.
The term ‘planning’ in such a context has been defined differently by the different writers like W.A. Lewis, Jan Tinbergin, Ragnar Nurkse and others. Briefly speaking, economic planning is a conscious and carefully thought- out process, initiated by the state for the efficient utilisation of the country’s available resources to realise some basic objectives.
In the words of H. D. Dikinson, “Economic planning is the making of major economic decisions— by the conscious decision of a determinate authority, on the basis of a comprehensive survey of a country’s existing and potential resources and a careful study of the needs of the people.”
On the basis of the available resources and the needs of the people, development plans for a definite period are prepared beforehand by the central planning authority. And then the economic activities of the country are directed towards the implementation of the plans.
Essentials of a Good Plan:
The following are some of the essential elements of a good plan:
1. An economic plan is based upon the initial resources of the country, presupposing a careful inventory of present and future availability of manpower and domestic resources.
2. It sets up feasible targets or goals for the terminal date.
3. It sets out the feasible policies that permit achievement of the terminal (end-period) goals from the initial resources taking into account the intermediate economic resources that can be imported from abroad (through loans or gifts) and that can be produced at home out of the initial resources by the mechanism of domestic investment.
The basic objective of planning is to exercise control over the private sector of an economy. Controls are exercised over economic resources which are scarce. When the economic resources of the country are rationally arranged with a predetermined purpose, it is called economic planning. It usually refers to planning by the State.
Economic planning has some essential features:
(a) There must be a centralised planning authority for preparing the plans and suggesting the means for their implementation.
(b) Before framing the plan, the planning authority should undertake an accurate survey of the available resources (both existing and potential) and the essential needs of the country.
(c) An economic plan must have some definite aims and objectives.
(d) The plan should lay down a series of targets on the different lines of production such as agricultural, industrial, etc.
(e) It should make a proper allocation of the proposed outlay into the different heads of development.
(f) An economic plan must have a definite time limit, usually 5 years (as in our country).
(g) There must be mutual consistency between the targets of the production of the different sectors.
The main point about a plan is that it involves careful computation of the macro-aggregates of GNP: balance of saving and investment, proper allocation of resources between public and private sectors, between one region and another, between agriculture, industry and other sectors, between rural and urban areas.