Economic Planning – Meaning, Types, Objectives of Economic Planning in India

By BYJU'S Exam Prep

Updated on: November 14th, 2023

Economic planning in India refers to the process of creating a long-term vision and strategy for the country’s economic development. Economic planning in India started in 1951 with the adoption of the First Five-Year Plan, which was designed to promote economic growth, reduce poverty and unemployment, and improve the standard of living of the people. The main objective of economic planning in India is to achieve balanced and sustainable economic growth that benefits all sections of society. The process involves the allocation of resources, the formulation of policies, and the implementation of programs to achieve the desired economic outcomes.

Economic planning in India has both good and bad outcomes. Even though the country has grown economically and poverty has reduced in the past few years, there are still some issues like not everyone earning the same amount of money, lack of jobs and unequal development in different areas. The government is working hard to make the planning better so that these problems can be solved and economic growth can be steady.

What is Economic Planning?

Economic planning involves developing strategies and policies to achieve economic goals. This is done by setting objectives, prioritizing them, allocating resources, and implementing measures. Planning can be done at different levels, such as national, regional, or local. Once goals and priorities are identified, policies and strategies are developed, such as focusing on infrastructure, promoting exports, or improving access to education and healthcare. These policies are then implemented through programs and schemes.

The success of economic planning depends on various factors, such as the availability of resources, the effectiveness of policies and strategies, and the capacity of institutions to implement them. In many countries, economic planning is often guided by a series of Five-Year Plans, which are updated periodically to reflect changes in economic priorities and conditions.
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Meaning of Economic Planning

Economic planning is when a government or organization decides what things are important and how to use the money to achieve certain goals. They make plans based on predictions and decide what rules to put in place to control the economy. The main goal of economic planning is to help the economy grow and improve in a way that can be maintained for a long time.

Objectives of Economic Planning in India

Economic planning in India has been an integral part of the country’s development strategy since its independence in 1947. The main objective of economic planning in India is to achieve rapid economic growth while promoting social justice and reducing poverty. This has been achieved through various Five-Year Plans, which outline the country’s economic and social goals, and the policies and strategies required to achieve them. Some of the key objectives of economic planning in India include the following:

  • Economic growth: One of the primary objectives of economic planning in India is to promote economic growth, measured in terms of gross domestic product (GDP). This involves increasing the production and consumption of goods and services in the country, creating jobs, and reducing poverty.
  • Reducing Poverty: Economic planning aims to reduce poverty by creating employment opportunities, increasing the productivity of the workforce, and providing basic necessities to the poor.
  • Self-Sufficiency: One of the primary objectives of economic planning in India has been to achieve self-sufficiency in key areas such as food, energy, and defence. This is done by promoting domestic production, reducing dependence on imports, and promoting indigenous research and development.
  • Social justice and equity: Economic planning in India also aims to promote social justice and equity by ensuring that the benefits of economic growth are distributed fairly across all sections of society.
  • Regional Development: Economic planning in India also aims to promote regional development by reducing regional imbalances and promoting the development of backward regions. This is done by providing infrastructure, incentives, and subsidies to promote industrialization and economic growth in these regions.
  • Employment generation: India has a large and growing population, with a significant portion of the workforce employed in the informal sector. Economic planning aims to create new employment opportunities, especially in the manufacturing and services sectors, and promote entrepreneurship and self-employment.
  • Reducing regional disparities: India is a vast country with significant regional disparities in terms of income, infrastructure, and access to basic services such as healthcare and education. Economic planning aims to reduce these disparities by allocating resources to underdeveloped regions and promoting balanced regional development.
  • Balanced Regional Development: Economic planning also aims to promote balanced regional development by ensuring that the benefits of development reach all parts of the country. This is achieved by investing in infrastructure, setting up industries in backward areas, and promoting entrepreneurship.
  • Increased Standard of Living: Economic planning in India aims to increase the standard of living of the people by promoting economic growth and providing access to basic amenities such as healthcare, education, and housing.

Types of Economic Planning

Economic planning in India can be categorized into different types based on various factors such as the approach, focus, scope, and level of centralization. The types of economic planning in India aim to promote sustainable economic growth, reduce poverty and inequality, and provide access to basic amenities for all sections of society. Here are the different types of economic planning in India:

  • Planning by Direction and Planning by Inducement: Planning by direction is a type of planning where the government controls and directs the allocation of resources and the production of goods and services. Planning by inducement, on the other hand, is a type of planning that encourages private investment and entrepreneurship through incentives and market-oriented policies.
  • Financial Planning and Physical Planning: Financial planning focuses on the allocation of financial resources, while physical planning focuses on the allocation of physical resources such as land, water, and minerals. Both types of planning are important for achieving sustainable economic growth and development.
  • Indicative Planning and Imperative Planning: Indicative planning provides guidelines and targets for the private sector and market forces to follow, while imperative planning involves mandatory regulations and controls to achieve specific targets.
  • Rolling Plans and Fixed Plans: Rolling plans are flexible plans that are reviewed and revised annually to reflect changing economic conditions and priorities, while fixed plans have a fixed duration and are not subject to mid-term revisions.
  • Centralized Planning and Decentralized Planning: Centralized planning involves the central government taking the lead in the planning and implementation process, while decentralized planning involves devolving the planning and implementation responsibilities to lower levels of government such as states, districts, and local bodies.

Economic Planning is in Which List?

Economic planning is a subject that falls under the Concurrent List in India. Both the central government and the state governments have the power to make laws on this subject, with the primary responsibility for economic planning lying with the Union government. State governments can participate in the planning process and implement the plans within their respective jurisdictions. The Constitution of India divides legislative powers between the Central and State Governments through three lists: Union, State, and Concurrent. The Union List pertains to Central Government’s jurisdiction, while the State List is for the State Governments. Both can make laws on subjects listed in the Concurrent List.

The subject of economic planning is included in the Concurrent List (List III) of the Seventh Schedule of the Indian Constitution. This means that both the Central Government and the State Governments can make laws and policies related to economic planning.

Features of Economic Planning

The most important features of economic planning can be decided on the basis of their main goals and objectives. The major aim behind adopting the idea of economic planning in India was to foster economic growth. There are several significant features of economic planning in India as follows:

  • Economic planning focuses on the creation and development of modern infrastructure. India has also seen the creation of major infrastructure such as better roads, railways, hydro projects, etc.
  • It also aims to contribute to the development of the education sector.
  • Economic plans focus on primarily identifying the main objectives that need to be achieved depending on the concerned country.
  • Resource allocation is one of the main features of economic planning in India.
  • Setting realistic targets is also one of the important features of economic planning.

Need for Economic Planning in India

After India became an independent country, the known leaders had to face a lot of questions as because of the British, the Indian economy became handicapped. It was challenging for the leaders to make the economy of the country strong. Since it was just the beginning, a formal model of Economic Planning in India was adopted. Also, the government came up with the idea of forming a commission and this Planning commission was established on 15th March 1950, with Former Prime Minister Jawaharlal Nehru as the Chairman. The Planning Commission used to directly report to the Prime Minister of India. However, this Planning Commission got replaced by the NITI Aayog (National Institute for Transforming India Aayog), established by Prime Minister Narendra Modi on 1st January 2015.

The major aim behind economic planning in India was to formulate plans for the most effective and balanced utilization of resources and determine priorities. Since then, the Planning Commission framed the centralized and integrated national economic plans at an interval of every five years, thereby known as the Five Year Plans.

Architect of Indian Economic Planning

The Architect of Indian Economic Planning is Mokshagundam Vishweswaraiah, also known as Sir M. Vishweswaraiah. He was a prominent Indian engineer, statesman, and scholar who played a key role in shaping the economic planning and development of India. Sir M. Vishweswaraiah was instrumental in the development and economic planning of India, particularly in the fields of Irrigation, Agriculture, and Education. He served as a member of the Planning Commission of India and played a key role in creating the First Five Year Plan, which was implemented in 1951.

Sir M. Vishweswaraiah contributions to the development and economic planning of India were widely recognized and he was awarded many honors, including the Bharat Ratna, the Highest Civilian Award in India in 1955.

Role of NITI Aayog in Economic Planning

NITI Aayog, the National Institution for Transforming India, is a policy think tank of the Government of India established in 2015. It replaced the Planning Commission, which was formed after independence to take up the task of economic planning in India. It has a dual objective of achieving sustainable development goals and enhancing cooperative federalism with a bottom-to-top approach.

Its initiatives include,
(a) Action Plan – 3 Years
(b) Strategy Plan – 7 Years
(c) Vision Plan – 15

Learn the Difference Between NITI Aayog and Planning Commission here.

Achievements of Economic Planning in India

The Economic Planning in India was successful in getting the following objectives-

  • Achievements in Economic Growth: One of the major achievements of Economic Planning in India was to boost economic growth. It was successful in the increase in the productivity of the industrial and agricultural sectors which has increased the per capita income and the national income as well.
  • Creation of Infrastructure: With time and proper planning, India was able to create better infrastructure, irrigation, and hydroelectric projects, better roads, and railway networks.
  • Development in Education: With Economic Planning, there has been noted that a large number of children are enrolled in schools, colleges, and universities.
  • Development of Science and Technology: The increase in technical skills and skilled manpower was seen as the result. Also, India is able to send technical experts to foreign countries.
  • Expansion of Foreign Trade: Because of the increase in the level of industrialization, there is an increase in the export of manufacturing and engineering goods. Thus, ultimately, foreign trade has increased.

Failures of Economic Planning in India

Though Economic Planning in India has been able to fulfill certain objectives, it was not able to eradicate the following-

  • Failure to Remove Poverty and Inequality completely: It is a big taboo but economic planning in India is still not able to get rid of these two issues.
  • Unemployment: It has opened the doors for a few workers every year but a large number of workers in India are still searching for employment. According to the stats, the unemployment rate in India is 6.6%.
  • Failure to eradicate Corruption and stop black money: Even after strategic planning, black money and corruption are still an area of concern.
  • Inflation: It is unable to stop the inflation of goods even after 70 years.
Important UPSC Notes:
Multidimensional Poverty Index Battle of Plassey
Quit India Movement Revolt of 1857
Military Exercises of India AFSPA
President of India Kyoto Protocol
Sources of Indian Constitution Tiger Census 2023
Fundamental Duties Types of Soil in India
Cripps Mission Amendments in Indian Constitution
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