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Economic Planning in Senthuran Preamble Often, in the economic literature we find the
terms development and growth are used interchangeably. However, there is a difference.
Economic growth refers to the sustained increase in per capita or total
income, while the term economic development implies sustained structural
change, including all the complex effects of economic growth. In other words,
growth is associated with free enterprise, where as development requires some
sort of control and regulation of the forces affecting development. Thus,
economic development is a process and growth is a phenomenon. Economic planning is very critical for a
nation, especially a developing country like India to take the country in the
path of economic development to attain economic growth. Why Economic Planning
for India? One of the major objective of planning in
India is to increase the rate of economic development, implying that
increasing the rate of capital formation by raising the levels of income,
saving and investment. However, increasing the rate of capital formation in
India is beset with a number of difficulties. People are poverty ridden.
Their capacity to save is extremely low due to low levels of income and high
propensity to consume. Therefore, the rate of investment is low which leads
to capital deficiency and low productivity. Low productivity means low income
and the vicious circle continues. Thus, to break this vicious economic
circle, planning is inevitable for India. The market mechanism works imperfectly in
developing nations due to the ignorance and unfamiliarity with it. Therefore,
to improve and strengthen market mechanism planning is very vital. In India,
a large portion of the economy is non-monitored; the product, factors of
production, money and capital markets are not organized properly. Thus the
prevailing price mechanism fails to bring about adjustments between aggregate
demand and supply of goods and services. Thus, to improve the economy, market
imperfections has to be removed; available resources has to be mobilized and
utilized efficiently; and structural rigidities has to be overcome. These can
be attained only through planning. In India, capital is scarce; and unemployment
and disguised unemployment is prevalent. Thus, where capital being scarce and
labour being abundant, providing useful employment opportunities to an
increasing labour force is a difficult exercise. Only a centralized planning
model can solve this macro problem of India. Further, in a country like India where
agricultural dependence is very high, one cannot ignore this segment in the
process of economic development. Therefore, an economic development model has
to consider a balanced approach to link both agriculture and industry and
lead for a paralleled growth. Not to mention, both agriculture and industry
cannot develop with out adequate infrastructural facilities which only a the
state can provide and this is possible only through a well carved out
planning strategy. The government’s role in providing infrastructure is
unavoidable due to the fact that the role of private sector in
infrastructural development of India is very minimal since these
infrastructure projects are considered as unprofitable by the private sector. Further, India is a clear case of income
disparity. Thus, it is the duty of the state to reduce the prevailing income
inequalities. This is possible only through planning. Planning History of The development of planning in India began
prior to the first Five Year Plan of independent India, long before
independence even. The idea of central directions of resources to overcome
persistent poverty gradually, because one of the main policies advocated by
nationalists early in the century. The Congress Party worked out a program
for economic advancement during the 1920s, and 1930s and by the 1938 they
formed a National Planning Committee under the chairmanship of future Prime
Minister Nehru. The Committee had little time to do anything but prepare
programs and reports before the Second World War, which put an end to it. But
it was already more than an academic exercise remote from administration.
Provisional government had been elected in 1938, and the Congress Party
leaders held positions of responsibility. After the war, the Interim
government of the pre-independence years appointed an Advisory Planning
Board. The Board produced a number of some what disconnected Plans itself.
But, more important in the long run, it recommended the appointment of a
Planning Commission. The Planning Commission did not start work
properly until 1950. During the first three years of independent India, the
state and economy scarcely had a stable structure at all, while millions of
refugees crossed the newly established borders of India and Pakistan, and
while ex-princely states (over 500 of them) were being merged into India or
Pakistan. The Planning Commission as it now exists, was not set up until the
new India had adopted its Constitution in January 1950. Objectives of Indian
Planning The Planning Commission was set up he
following Directive principles: v
To make an assessment
of the material, capital and human resources of the country, including
technical personnel, and investigate the possibilities of augmenting such of
these resources as are found to be deficient in relation to the nations
requirement. v
To formulate a plan
for the most effective and balanced use of the country’s resources. v
Having determined the
priorities, to define the stages in which the plan should be carried out, and
propose the allocation of resources for the completion of each stage. v
To indicate the
factors which are tending to retard economic development, and determine the
conditions, which, in view of the current social and political situation,
should be established for the successful execution of the Plan. v
To determine the
nature of the machinery which will be necessary for securing the successful implementation
of each stage of Plan in all its aspects. v
To appraise from time
to time the progress achieved in the execution of each stage of the Plan and
recommend the adjustments of policy and measures that such appraisals may
show to be necessary. v
To make such interim
or auxiliary recommendations as appear to it to be appropriate either for
facilitating the discharge of the duties assigned to it or on a consideration
of the prevailing economic conditions, current policies, measures and
development programs; or on an examination of such specific problems as may
be referred to it for advice by Central or State Governments. The long-term general objectives of Indian
Planning are as follows: v
Increasing National
Income v
Reducing inequalities
in the distribution of income and wealth v
Elimination of poverty v
Providing additional
employment; and v
Alleviating
bottlenecks in the areas of: agricultural production, manufacturing capacity
for producer’s goods and balance of payments. Economic growth, as the primary objective has
remained in focus in all Five Year Plans. Approximately, economic growth has
been targeted at a rate of five per cent per annum. High priority to economic
growth in Indian Plans looks very much justified in view of long period of
stagnation during the British rule. |
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