Economic planning may defined as a continuous process which involves decisions or choices pertaining to alternative ways of utlising the available resources for achieving particular goals during a specified time period in the Authority (e.g., Planning Commission) which is entrusted with the powers of formulating, implementing and reviewing the national plan.
A development plan may contain the following features :
(i) A survey and diagnosis of the present economic situation :
(ii) Policy objectives, particularly as related to the future development goals to the country :
(iii) A set of strategies by which the set objectives are to be achieved ; and
(iv) A macroeconomic projection for the economy as a whole.
Nature and Scope of Economic Planning
The nature and scope of economic planning depends upon the type of economic system in which planning is carried out. Economic planning under different economic systems is stated below :
- Planning in a Capitalist Economy: In a capitalist economy, planning is more of an indicative type and it is democratic in nature. State intervention is limited to : (a) formulation of a plan, and (b) adoption of indirect controls. The State can only issue guidelines and not directives. Market forces are left to decide their own course of action. This type of planning has limited effectiveness in the absence of policy instruments that can ensure that overall and individual industry growth targets are achieved.
- Planning in a Socialist Economy: In the socialist system planning is of an imperative type and it is totalitarian in nature. In addition to policy objectives and growth strategies, detailed targets are laid down for different industries. Production units which are controlled largely by the State are obliged to follow the plan and to fulfill the targets.
- Planning in a Mixed Economy: In a mixed economy, planning is a more difficult task, On the one hand, planning to be meaningful cannot be merely of an indicative type nor can it be of an imperative nature in the absence of State control on the means of production. It has to be a judicious mix of the two types. Both direct and indirect controls have to be used. Planning has to be neither elementary nor too rigid.