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GK SPECIAL TOPIC : TYPES OF ECONOMIC PLANNING
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Friday, 18 July 2014 06:44


 

 

 


TYPES OF ECONOMIC PLANNING

Economic planning once again has come into prominence with the dangers of market imperfections haunting all types of economic systems. 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.

Planning by Inducements: Planning by inducement is also known as ‘indicative planning’ or ‘market incentives’. In such type of planning, the market is manipulated through incentives and inducements.

Planning by Directions: This type of planning is practiced in socialist countries like China, Former USSR, Cuba, North Korea, etc. Under planning by direction, there is one central authority which plans, directs and orders the execution of the plan in accordance with the pre-determined targets and priorities.

Physical planning: is concerned with physical allocation of resources on the one side, while with the product yields on the other side. Its aim is to bring physical balance in between investment and output.

Financial Planning: in this type of planning equilibrium is established between demand and supply to avoid inflation and bring economic stability.

Centralized Planning: all the economic decisions are taken by the central authority or the government. It is the government which formulates economic plans, determines objectives, set targets and priorities.

Decentralized planning: is connected with the capitalistic economies. The decentralized planning is implemented through market mechanism. Under decentralized planning, the operation is from bottom to top.

Structural Planning: Planning which is aimed at bringing changes in socioeconomic set-up of a country is termed as structural planning. This type of planning is attributed to the planning which was made in USSR in 1929 when the existing land-lord-system was abolished, collective farming was introduced and trade, industries and transport system was nationalized.

Functional Planning: is a type of planning where hardly any big change is brought about in the existing socio-economic set-up of the country. It means when planning is made in the presence of existing institutions is termed as functional planning. In France, Germany, UK, etc planning is being made in the existing framework of capitalism.

Democratic Planning: the philosophy of democracy is followed. Since formulation to the execution of the plan, the people are taken into confidence. Under democratic planning, whole of the economic activities are performed through price mechanism.

Totalitarian Planning: there is a central control, and all economic activities are governed by the central authority. In totalitarian planning, all of consumption, production, distribution and exchange like activities are controlled by the central planning authority. Totalitarian allows no consumer sovereignty and democratic freedom.

Fixed Plan: In a fixed plan, the contents of the plan are fixed in relation to a fixed time period. These contents consisting of targets, priorities, strategies and resources, etc. will not be changed during the particular time period for which the plan has been prepared except for severe unforeseen events.

Rolling Plan: Rolling planning refers to the rolling of a plan at intervals usually one year, so that it continues to be a plan of certain number of years. It is usually the medium term plan.

Short-term plans are also known as ‘controlling plans’. They encompass the period of one year, therefore, they are also known as ‘annual plans.’ The main objective of short-term planning is to raise the revenue, attain the short-term economic targets, bring price stability, and remove deficit in BOP.

The medium-term plans last for the period of 3 to 7 years. But normally, the medium term plan is made for the period of five years. The medium-term planning is not only related to allocation of financial resources but also physical resources.

Long-term plans last for the period of 10 to 30 years. They are also known as ‘perspective plans’. The origin of long-term planning goes back to USSR where Goelro Plan 1920-35 was first formulated and implemented in 1920.

Corrective Planning: Planning consisting of fiscal and monetary measures with the aim of removing the imbalances of the economy is known as ‘corrective planning’.

Developmental Planning: Planning which is aimed at developing the whole economy is known as developmental planning. Development planning involves the application of a rational system of choices among feasible courses of investment and other development actions.


 

 



 

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