Economic Planning

Economic planning refers to any directing or planning of economic activity by the state, in an attempt to achieve specific economic or social outcomes. Planning is an economic mechanism for resource allocation and decision-making in contrast with the market mechanism. Most economies are mixed economies, incorporating elements of market mechanisms and planning for distributing inputs and outputs.[1] The level of centralization of decision-making ultimately depends on the type of planning mechanism employed; as such planning may be based on either centralized or decentralized decision-making.

Economic planning can apply to production, investment, distribution or all three of these functions. Planning may take the form of directive planning or indicative planning. An economy primarily based on central planning is a planned economy; in a planned economy the allocation of resources is determined by a comprehensive plan of production which specifies output requirements.

On the eve of the 11th Plan, our economy is in a much stronger position than it was a few Years ago. After slowing down to an average growth rate of about 5.5% in the 9th Plan period (1997 - 98 to 2001 - 02), it has accelerated significantly in recent Years.

The average growth rate in the last four Years of 10th Plan period (2003 - 04 to 2006 - 07) is likely to be a little over 8%, making the growth rate 7.2% for the entire 10th Plan period. Though, this is below the 10th Plan target of 8%, it is the highest growth rate achieved in any plan period.

This performance reflects the strength of our economy and the dynamism of the private sector in many areas. Yet, it is also true that economic growth has failed to be sufficiently inclusive, particularly after the mid - 1990s.

India's Vision for the 11th Five Year Plan :

The 11th Plan provides an opportunity to restructure policies to achieve a new vision based on faster, more broad - based and inclusive growth. It is designed to reduce poverty and focus on bridging the various divides that continue to fragment our society.

The 11th Plan must aim at putting the economy on a sustainable growth trajectory with a growth rate of approximately 10 per cent by the end of the Plan period. It will create productive employment at a faster pace than before, and target robust agriculture growth at 4% per Year.

It must seek to reduce disparities across regions and communities by ensuring access to basic physical infrastructure as well as health and education services to all. It must recognize gender as a cross - cutting theme across all sectors and commit to respect and promote the rights of the common person.

Rapid growth is an essential part of our strategy for two reasons. Firstly, it is only in a rapidly growing economy that we can expect to sufficiently raise the incomes of the mass of our population to bring about a general improvement in living conditions. Secondly, rapid growth is necessary to generate the resources needed to provide basic services to all.

Work done within the Planning Commission and elsewhere suggests that the economy can accelerate from 8 per cent per Year to an average of around 9% over the 11th Plan period, provided appropriate policies are put in place.

With population growing at 1.5% per Year, 9% growth in GDP would double the real per capita income in 10 Years. This must be combined with policies that will ensure that this per capita income growth is broad based, benefiting all sections of the population, especially those who have thus far remained deprived.

A key element of the strategy for inclusive growth must be an all out effort to provide the mass of our people the access to basic facilities such as health, education, clean drinking water etc. While in the short run these essential public services impact directly on welfare, in the longer run they determine economic opportunities for the future.

The private sector, including farming, micro, small and medium enterprises (MSMEs) and the corporate sector, has a critical role to play in achieving the objective of faster and more inclusive growth.

This sector accounts for 76% of the total investment in the economy and an even larger share in employment and output. MSMEs, in particular, have a vital role in expanding production in a regionally balanced manner and generating widely dispersed off - farm employment. Our policies must aim at creating an environment in which entrepreneurship can flourish at all levels, not just at the top.
All this is feasible but it is by no means an easy task. Converting potential into reality is a formidable Endeavour and will not be achieved if we simply continue on a business - as - usual basis. There is need for both the Centre and the States to be self critical and evaluate programmes and policies to see what is working and what is not.

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