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Planning in the context of Liberalisation

The role of planning in managing modern market economy is quite

different from what it was three decades ago when the public sector was
seen as having an expanding role and government sector pervasive
whereas under the present circumstances, the country expects and
encourages much freer operation of market forces and the Government is
withdrawing from large part of the economy. It is believed that free
markets are conducive to economic efficiency and, therefore, higher
economic growth. But there is a misconception that the Government has
no role to play in the change economic scenario. It is true that the role of
the Government is radically different from what it was in the past.

The following points give us a clear idea about the role of planning in the
context of liberalisation, privatisation and globalisation (of the Indian

1. Investment in social sector: A whole range of social sector,

especially health and education, are areas where the Government must
play a much larger role. Public investment both at the Centre and in the
States here plays a major role in the development of the country. Private
sector here cannot be expected to come in and invest directly as the part
played by this sector is uneven due to their profit driven motive.

2. Infrastructure development: In the area of economic infrastructure,

there is huge need for public-private partnership. In the past, economic
infrastructure such as railways, ports, national roads and power were all
provided by the Public Sector. Now, these services have been opened up
to the private sector to the extent that the private sector can be expected
to come in and this varies from sector to sector. However, the entire area
of rural economic infrastructure is one that cannot be left entirely or
mainly to the private sector. Programmes of soil and moisture
conversation, rural land development, provision of safe drinking water and
sanitation are areas where the state has a role to play.

3. Coordination of different governments in federal politics: In the

present context of federal polity, some subjects are allotted to the central
government, others are left to be managed by the Sates, and in some
both the Centre and State governments have a concurrent jurisdiction
added to that some issues are to be tackled by the elected Panchayati raj
institutions at the village level and by the urban bodies. The most vital
function of planning in such a federal system is to evolve a shared vision
of or a shared commitment to the national objectives in the government
at all levels, but also among all other economic agents.

4. Limitations of the market mechanism: In market economies,

planning has been adopted to overcome the limitations of the market
mechanism in respect of both effeiciency and equity. For India, the
economic planning is basically required due to its economic
backwardness. Relying entirely on market mechanism, the country cannot
hope to come out of the low level equilibrium trap in which it can fall
under dire circumstances.

5. Ensuring Social Justice and Equity: Planning must be aimed at

ensuring its population social justice and equity. In fact all the objectives
said above are necessary to achieve social justice. But the sufficient
condition for sustaining social justice and equitable distribution of income
is to introduce reforms in various sectors by changing the age old systems
which have perpetuated poverty and inequality and obstructed
development of industrial and service sector or caused low productivity in

6. Increasing the Rate of Capital Formation: Planning can also raise

the rate of capital formation in the less-developed countries like India. The
surpluses of public enterprises as found in the planned economy can be
utilized for investment and capital formation. Rate of capital formation can
be increased through planned investment in the construction of roads,
bridges, manufacturing of machineries and transport equipments etc..
7. Reorganization of Foreign Trade: Economic planning in the less-
developed countries can bring about fundamental Changes in the foreign
trade structure of such countries like India. The foreign trade structure
may be reoriented from primary producing economy to the industrialized
economy. Through proper controls of import and effective promotion of
export of industrial goods the development plans can reorganize the
foreign trade structure. In India, the trade policy has been reoriented to
realize some cardinal objectives such as import control and substitution,
export promotion and growth of economy. Owing to such development the
trade structure is no longer regarded as colonial as it was before


From the above it is clear that in not only developing countries like India,
but of the developed countries as well, planning forms a vital component
in deciding the future of the country.

To improve the effectiveness of the various programmes, which help the

poorest of the poor, the institution of plan administration must be re-
oriented to capture and internalise the aspirations of the common man
and suitably modify them keeping in view the resources availability and
the state of technology.