Explain the meaning of planning as an instrument of resource allocation. Why is there a need for planning in the development process?

MEANING AND FEATURES OF PLANNING: Planning can be defined as an instrument to bridge the gap between the realistic and idealistic situation. Planning is a conscious and not a coincidental activity. Planning is opposite of market. In a market system nothing is happening consciously but is an outcome of the forces of demand and supply. But planning envisages what to happen and makes action plan for how will it happen.

Two basic elements of planning are:

(a) Goals: Goals of various countries vary from each other. Even the goals of country vary time-to-time. A plan document may aim at attainment of one goal or many goals which may be complementary or conflicting in nature.

(b) Means: The two means of attaining goals are policies and instruments. Policies describe the outlines of actions for the fulfilment of plan goals. Policy formation is to be done keeping in mind socio-economic-political- religious-environmental factors. Instruments are defined as the qualitatively and quantitatively defined means of action by which it is intended to achieve the plan goals. These instruments may be fiscal instruments like taxes and subsidies; Monetary instruments like bank rate, LRR etc. or Economic instruments like better infrastructure.

Features of Planning

(a) Institutionalized Activity: Planning is an institutionalized activity that means there is a proper body which

has resources and power to make plans and to execute them. Planning involves following steps:

(i) Making plans;

(it) Decision-making regarding how these plans will be executed;

(iit) Implementation of plans;

(iv) Keeping control on their execution.

(b) Quantified Goals and Resources: Economic wants are unlimited but means are limited; hence an economy needs to quantify the goals and resources that are required to attain them. For example, we can't say India has planned to increase its GDP; it has to be quantified like India has planned to increase its GDP by 8% in twelfth FYP.

(c) Programmed Action: A programme of action is necessary to attain whatever an economy plans for. Suppose, India has planned to increase its GDP by 8% in twelfth FYP, now it needs to develop a thorough action plan how will it be attained.

(d) Periodic Action over a Definite Area: We also need to keep a check from time to time whether the plans we prepared are working successfully in their respective areas; if there are any loopholes, they can be rectified immediately.

(e) Rational Socialized Activity: Planning has to done by a government authority as it gives direction to the economy which society at large will accept. Government planning authority must consider social costs and benefits involved with all plan options.

Need for Planning

‘Failure to planning 1s planning to failure’. The need for planning can be understood from the above statement. Various convincing arguments put forward for the need for planning can be categorised into

(a) Economic Factors

(b) Non-Economic Factors.

Economic Factors:

1. Planning is a tool to make optimum utilization of resources and this is the central issue in the field of economics-optimization.

2. Planning takes our attention on the areas which demand immediate solution or policy formulation for example, census survey of 2011, is demanding planning authorities to have a national policy for correcting adverse sex ratio.

3. In order to stimulate the rate of capital formation, an economy needs to plan the policies and instruments to enhance savings and motivate people for investment.

4. Planning helps to address economic issues which may have social impact as well like literacy levels, sex ratio, high infant mortality rate, poverty etc.

5. Planning helps to justify the interest of future generation and ensures that market gives enough opportunities to economic agents to perform their economic activities most efficiently. It also helps in increasing productivity of the economy and thereby takes care of the interests of future generation.

6. Planning helps to keep an eye on the data and the extent to which economy is performing up to the expectations.

Non-Economic Factors:

1. Symbol of Sovereignty: Planning is taken as a symbol of sovereignty by the newly independent nations. Through planning, these nations aim to attain a national personality and a dignified position in world politics and economy.

2. Optimism Associated with Planning: Planning also brings about optimism that we shall learn from our past and do the best in our present to make our future bright and beautiful.

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