Indian Economy, 5th edition (10 page)

(i)
Numerical (i.e. quantitative) targets
of growth and development are set by the plans. As for example, five lakh tonnes of steel, two lakh tonnes of cement, 10,000 kms. of national highways, 5000 primary schools, etc. will be produced/built in the coming 5 or 6 years.

(ii)
As the
state
controls the ownership rights over the resources, it is very much possible to realise the above-cited planned targets.

(iii)
a
lmost
no role for market,
no price mechanism with all economic decisions to be taken in the centralised way by the state/Government.

(iv)
n
o private participation in the economy, only state played the economic role.

The
Command Economies
followed this kind of planning. That is why such economies are also known as the
Centrally Planned Economies
—
the USSR, Poland, Hungary, Austria, Romania, etc. and finally China. Basically, it was the migration of some of the great economists from the Soviet Bloc countries to Britain and the USA that a proper study and discussion started on the very nature and purpose of planning in the command economies. Many of these economists went back to their countries of origin after the Second World War to serve and in some measure, suffer the revolution there.
13
It was their articulate and contemporary economic thinking which formed the basis for the idea of mixed economy in the post-War world. One among them was Oskar Lange, the famous Polish economist who after returning home to serve as the Chairman of the Polish State Economic Council (as India has the Planning Commission) suggested and coined the concept of
‘market socialism’
in the 1950s. His ideas of market socialism were cancelled by not only Poland but also by the other state economies of the time.
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The peak of this type of planning was reached in China after the Cultural Revolution (1966–69) which led to an economic slowdown in the country which had adopted a
s
oviet-style central planning system after 1949. Under Deng Xiaoping (1977–97), China decentralised a great deal of economic power with its announcement of the “open door policy” in 1985 to save the economy. The Chinese
open door policy
was an initiative in the direction of the ‘market socialism’ under the communist political design itself (a popular student demand for political reform in favour of democracy was ruthlessly repressed in Tiananmen square in 1989). Similarly, the Soviet Union under the leadership of Mikhail Gorbachev began a process of political and economic reforms, called
prestroika
(i.e. restructuring) and
glasnost
(i.e openness) in 1985 to save the failed economic experiments in the state economy. Other East European economies followed, similar economic reforms 1989 onwards. Thus, the whole world of the state economies had moved towards market economy by the late 1980s. Since then none of the countries have followed imperative planning.

2. Indicative Planning

In the following two decades after the
s
oviet planning commenced, the idea of planning got attention from the democratic world. A time came when some such economies started national planning. As they were neither the state economies nor
c
ommunist/Socialist political systems, the nature of their planning was to be different from the command economies. Such planning has been called as indicative planning by the economists and the experts. Identifying features of indicative planning may be summed up as under:

(i)
e
very economy following the indicative planning were the mixed economies.

(ii)
u
nlike a centrally planned economy (countries following imperative planning) indicative planning works through the market (price system) rather than replaces it.
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(iii)
s
ide by side setting numerical/quantitative targets (similar to the practice in the imperative planning) a set of economic policies of indicative nature is also announced by the economies to realise the plan targets.

(iv)
t
he indicative nature of economic policies which are announced in such planning basically encourage or discourage the private sector in its process of economic decision making.

After converting to mixed economy by the mid-1940s, France commenced its first six year plan in 1947 which got popularity as the
Monnet Plan
(he was the first chairman of the General Planning Commission and the then Cabinet Minister for
p
lanning in France).
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Later, Monnet Plan became synonymous with indicative planning. This plan is also sometimes described as the
basic sector planning
as the Government had selected eight basic industries as the core of development in which the nature of planning was almost
imperative
i.e. under the state monopoly (these sectors were owned by the private sector till 1944 when France went for their nationalisation)
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. Other economic activities were open for private participation for which indicative kind of policy-planning was essential. France as well as Japan have followed indicative planning with great successes. It was in 1965 that the UK commenced such a planning with the National Plan and abandoned in 1966 after being overtaken by events (a balance of payment crisis resulting in a deflationary package of measures). Since then the UK never went for the Planning.
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Though the first use of economic planning as an instrument of economic progress was done by the USA (with the Tennessee Valley Authority in 1916 at regional level), it never went for a
formal
national planning. In the 1940s, some economists had suggested in favour of the use of national planning. We may have a reflex of indicative planning in the USA if we look at the
Presidentail Reports
which come after regular intervals. These reports are just ‘benchmarks’ in the area of resource utilisation and governmental announcements of its objectives—basically trying to motivate the private sector towards the area of public objectives. The indicative planning as it is practised by the mixed economy, any growth target could only be achieved once the public and the private enterprises worked in tandem.
T
his is why besides the plan targets, the governments need to announce some set of the indicative policies to encourage and motivate the private sector to accelerate their economic activities in the direction of the plan targets.

After the Second World War, almost all the newly independent countries adopted the route of planned development.
T
hough they followed an overall model of the indicative planning, many of them had serious inclination towards imperative planning. As in the case of India, the heavy bias towards imperative planning could only be reformed once the process of economic reforms was started in 1991.

Today, as there are mostly only mixed economies around the world, any country’s development planning has to be only of the indicative type. After the revival of the role and the need of market in promoting growth and development via the Washington Consensus (1985), the Santiago/New Consensus (1998) and the World Trade Organisation (1995), only indicative planning has remained possible with the state playing only a marginal role in the economy especially in the areas of social importance (i.e. nutrition, healthcare, drinking water, education, social security, etc.).

There are still many other types of planning depending upon the point of view we are looking with. For example, from the territorial point of view, planning could be
regional
or
national.
From the political point of view planning could be
central, state
or
local.
Similarly, from the participatory point of view, planning has been categorised into
centralised
and
decentralised.
Again, from the temporal point of view planning could be
long-term
or
short-term
(in relative sense). Finally, from the value point of view planning could be
economic
or
developmental.

A major classification of planning is done on the basis of societal emphasis by the planning. The type of planning which gives less emphasis upon the social and institutional dimensions is known as the
normative planning.
In such planning, the planners just search for the best possible results in relation to the established goals giving less importance to issues like caste, creed, religion, region, language, marriage, family, etc. Opposed to it, the
systems planning
gives due importance to the socio-institutional factors. This is a planning from social-technical point of view but only suitable for a country which has lesser degree of social diversities (naturally, not fit for the Indian conditions). But in the coming years there was a shift in the very thinking of the policy-makers. The
Economic Survey 2010-12
is probably the first GoI document which advocates the need for the
systems approach
to planning in India. It is believed that until a programme/scheme run by the governments are not able to connect with the customs, traditions and ethos of the population, their acceptability will not be of the desired levels among the target population. Establishing an empathic relationship between the programmes/schemes and target population is now considered as an important aspect of planning and policy-making. Such a change in the thinking is based on the experiences of India and other countries of the world.

Economic planning is classified into more types—
sectoral
and
spatial.
In sectoral planning, the planners emphasise the specific sector of the economy i.e. agriculture, industry or the services. In spatial planning development is seen in the spatial framework. The spatial dimensions of development might be defined by the pressure and requirements of national economic development. Indian planning has been essentially normative—single level economic planning with a greater reliance on the sectoral approach though the multi-level regional or spatial dimensions are being increasingly emphasised since the early 1990s.