Role of economic planning

Economic planning is a resource allocation mechanism that is contrasted with market mechanism.

Economic Planning: Direct allocation of resources

Market Mechanism: Indirect allocation of resources

Central Planning : refers Planned economy when we Plan the output too

Decentralized Planning means which is based on collective decision making and disaggregated
information.

Importance or objectives or advantages of Planning:

1) Increase in national income

2) Superior Decision

3) Achievement of full employment

4) Equal distribution of wealth

5) Elimination or regional disparity

6) Improvement in BOP

7) Balanced economy

8) Control of economic crisis

9) Overpopulation

10) Self sufficiency in food

11) Industrial development

12) Increase in welfare program

13) Increase in capital formation

14) Elimination of Poverty

  Planning as a process of rebuilding economy earned worldwide public support in 1940’s &
1950’s

 There was a general consensus on one point that ‘the government’ should plan for the
development, not the private sector.

 Great depression in Europe, Post WW2 reconstruction of the world + spectacular economic
growth against heavy odds in the Soviet Union in the 1930s and 1940s contributed to this
consensus.

National Planning Committee’ was established under the chairmanship of Nehru by INC.

Its recommendations could not be implemented because of the beginning of the Second World
1938 War

1944 ‘Bombay Plan’ was presented by 8 leading industrialists of Bombay

1944 ‘Gandhian Plan’ was given by Narayan Agarwal

1945 ‘People’s Plan’ was given by M N Roy

1950 ‘Sarvodaya Plan’ was given by J P Narayan – based on Vinoda bhave’s philosophy

Planning Commission (as an advisory body to the government) was set up in 1950 by a

simple resolution of Government. The scope of the resolution by which Planning

Commission was formed
Like USSR, Planning Commission of India opted for five year plan which permitted the
government to focus on the larger picture and make long term intervention in the
economy.

Planning Commission of India (PC)

 Prime minister was the ex officio chairman of the planning commission assisted by a deputy
chairman. It included 6 union cabinet ministers as its ex officio members. There was also a
member secretary.

 The planning commission was an autonomous body, which worked closely with union and
state cabinets and had full knowledge of their policies. Institutionally it was a part of the
 cabinet organization and the ‘demands for grants’ for the PC was included in the budget for
the cabinet secretariat.

1. First Five Year Plan:

I. It was made for the duration of 1951 to 1956.

II. It was based on the Harrod-Domar model.

III. Its main focus was on the agricultural development of the country.

IV. This plan was successful and achieved growth rate of 3.6% (more than its target)

Five IITs are started

Five year Plans till 2023