The majority of economies in today's world are mixed economies. Economic planning refers to the formulation of specific policy measures that are used to plan future economic activity. These measures will be carried out in the future in accordance with planned economic goals. There are different types of planning which are discussed in this article, which is important for UPSC Exams.

What is Economic Planning?

• Economic planning is a resource allocation method based on a strategy for addressing a restricted maximizing problem with an iterative solution.
• In contrast to the market process, planning is a system for allocating resources between and within organizations.
• Since the introduction of planning into the world of economics, economists have come up with a variety of definitions. However, many of them think that H D Dickinson's formulation is the most important.
• According to him, economic planning is “the making of major economic decisions - what and how much is to be produced and to whom it is to be allocated by the conscious decision a determinate authority, on the basis of a comprehensive survey of the economic system as a whole”.

Types of Economic Planning

Planning by Direction and Planning by Inducement

• Planning by direction, which is an inherent feature of socialist society, involves the complete absence of a laissez-faire system. One central authority plans directs and executes according to predetermined economic priorities under this style of economic planning.
• Planning by Inducement, on the other hand, is more democratic in nature. It entails market manipulation for the sake of planning. Although there is no obligation, planning by enticement employs some persuasion techniques.
  • Enterprises have production and consumption independence under this sort of planning. However, the state uses rules and methods to manage and regulate these freedoms.

Financial Planning & Physical Planning

• Resource allocation in financial planning is done in terms of money, and it is critical to eliminate supply and demand misalignments. As a result, it is critical in maintaining a supply-demand balance and regulate inflation in order to achieve economic stability in the country.
• The allocation of resources in physical planning is done in terms of persons, machinery, and materials. To guarantee that bottleneck situation are avoided during the execution of the plan, an overall assessment of the available resources is conducted. It is regarded as a method of long-term planning.

Indicative Planning & Imperative Planning

• The operation and execution of plans are based on the principle of decentralization in indicative planning. The private sector is neither entirely regulated nor directed to accomplish the plan's objectives under this style of planning. However, it is projected to meet those goals. The government assists the private sector in this endeavor but does not direct it in any way.
• In imperative planning, on the other hand, the government has complete control over all economic operations. The government has complete control over the production factors. Even the private sector is required to follow the government's strict policies and choices.

Rolling Plans & Fixed Plans

• Every year, three plans are set up and implemented as part of a rolling plan. The first is an annual plan, which involves planning for a single year; the second is a 5-year plan; and the third is a 15-year plan, which includes bigger goals and objectives that are aligned with prior year planning.
• A fixed plan, in contrast to a rolling plan, refers to preparing for a specific length of time, such as four, five, or ten years ahead. It provides specific goals and objectives that must be completed in a specific time frame. Unless there is an emergency, the annual objectives are met (those listed in the fixed plan).

Centralized & Decentralized Planning

• Planning is considered a limiting prerogative of the central planning authority under the centralized planning system. The plan's formulation, as well as its objectives, targets, and priorities, are completely the responsibility of this authority. There is no economic liberty, and all economic planning is controlled by bureaucrats.
• Decentralized planning, on the other hand, refers to the execution of a plan from the ground up. The central planning body formulates the plan in conjunction with the various administrative entities for the central and state schemes in this style of planning. The plan for district and village levels is created by the state planning authority.

Economic Planning in India

• Sir M Visvesvaraya, a civil engineer and ex-dewan of the state of Mysore, published "The Planned Economy of India" in 1934, which was the first attempt to establish economic planning in India.
• The Planning Commission, which was replaced by NITI Aayog on January 1, 2015, is responsible for economic planning in India.
• The NITI Aayog (National Institution for Transforming India) was founded with the intention of accomplishing long-term development goals through cooperative federalism.
• The history of economic planning in India is interesting, from the formation of NITI Aayog through the replacement of the Planning Commission's 5-Year Plan with a 15-Year Vision document.

Conclusion

The different types of planning are taken up by the government based on the development needs and the socio-political scenario of the country. Many major economies follow a decentralized approach to planning due to its benefits and huge growth potential. Even in India, the planning commission is replaced by the NITI Aayog to give impetus to decentralized planning.