The idea of Development Planning and Mixed Economy

1. Development planning and change are interrelated term. Sociologically development refers to process of social change. Which is planned and desired by society. Therefore development is value laden concept Social Change refers to attrition that occur in the social structure and social relations. It is value free concept Planning implies that ways and means are devised and decisions for future actions are chalked out well in advance. All cases of social change con not be described as development Only planned and desired as development. One such intervention can be seen in planned economy.
2. A planned economy is an economic system in which decisions about the production, allocation and consumption of goods and services is planned ahead of time, in either a centralized or decentralized fashion. Since most known planned economies rely on plans implemented by the way of command they have become widely known as command economies.The government takes the initiative and set the goals and targets to be followed by the market forces.The private sector becomes partner in the formulation of a plan and responsible for its implementation.
3. Planning is commitment to concentrated actions. It is adjustment of social institutions to new social, economic and political conditions. Target settings for different sectors of economy that determine the supply. It is a type of economy in which some central authority makes a wide range of decisions pertaining to production and wages. The government can harness land labor, and capital to serve the economic objectives of the state (which, in turn, may be decided by the people through a democratic process).
4. Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. For example, many modern societies fail to develop certain medicines and vaccines which are seen by medical companies as being unprofitable, but by social activists as being necessary for public health. The state can begin building a heavy industry at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing. Second a planned economy can maximize the continuous utilization of all available resources.This means that planned economies do not suffer from a business cycle.
5. Under a planned economy, neither unemployment nor idle production facilities should exist beyond minimal levels, and the economy should develop in a stable manner, unimpeded by inflation or recession. A planned economy can serve social rather than individual ends: under such a system, rewards, whether wages or perequisites, are to be distributed according to the social value of the service performed. A planned economy eliminates the dependence of production on individual profit motives, which may not in themselves provide for all society’s needs.

Idea of planning and social change

1. Planning has become on importance factor in social change. Changes usually cause positive as well as negative impacts. Planned change or development may be defined as transformation that aims to minimize that negative impacts on society. Planning is a needed strategic intervention for social change. Each Country based on its history socio-political institutions, development priorities, resource endowments and institutional structure undertakes development planning.
2. That methodologies of planning are usually concerned with the choice of technique. Planning can take place at different depth levels. It may be earned out in many different ways. However it is desirable to have multiple perspective in development planning.
3. Development planning methods, which take into accounts different dimensions and integrate than into one are in the infancy. Endogenous development is the main focus of development planning efforts. Development planning is usually done from the perspective of government agencies. Sociologists have constantly reminded government agencies to extend the nation of planning from the idea of planned economy to that of planned society.
4. Bottom more…development planning is at the cross-roads today. Social and cultural dimensions of development are usually understood as additional programmers and as investment outside the industrial and agricultural growth frameworks. This is where sociological analysis assumes immerse values. By “keeping every things in view”, by defining clearly and describing the inter connections between social phenome…. of different kinds, A sociologist makes planning more effective.

Planning aims at:

1. Change in social organization, and
2. Community welfare like improving educational facilities, increasing employment opportunities, doing away with evil social practices, etc.
3. Prior determination of objectives and proclamation of values;
4. Concreteness, that is, laying down concrete details of its subject-matter, and
5. Co-ordination of diversified skills and diversified professional training.

For the success of a plan, it is necessary that,

1. Plan must stem from the people themselves,
2. People’s participation is extremely necessary;
3. Initiative for implementing the plan is to be taken not by the planners but by the activists in different walks of life,
4. Priorities have to be decided in advance, and
5. Arbitration in decision-making must be by a person who has technical knowledge and is a trained professional because he has the capability of visualizing alternative solutions.

Economic planning was advocated by M. Visveswaraya in the1940s in India.The Indian National Congress appointed a National Planning Committee on the eve of the Second World War (1938-39) to frame an all India plan. But it was the Bombay Plan (known as Tata Birla Plan) which made people planning conscious in India. In 1944, the Department of Planning and Development was also created However, at this stage, government plans were not concerned with definite economic targets.They were mainly concerned with issues like raising standard of living, increasing purchasing power of people, stabilizing agricultural prices, developing industries, removing wealth disparities and raising the level of backward classes.

After independence, Indian Planning commission was set up to access countries need of material capital and human resources and to formulate economic plan for their more blended and effective utilization. It incorporates virtues of both capitalism and socialism aiming at fostering free and faster growth of human personality.

• Planning was taken up in India essentially to give economic content to political freedom it was conceived of as an instrument of socio-economic change and expected to provide a controlled and faster rate of growth. In essence it sought to convert political democracy into socio-economic democracy and resolve the contradictions of an unequal society.
• In this context Planning Commission was set up in India to act as an advisory committee of the cabinet It was assigned seven duties :
  1. To make an assessment of the material capital and human resources of the country
  2. To formulate a plan for the most effective and balanced utilization of the country’s resources,
  3. To determine national priorities of development and define the stages of growth and suggest allocation of resources,
  4. To indicate factors tending to retard eco develop and determine the condos necessary for the successful execution of the plan,
  5. To determine the nature of machinery required for implementation of each stage of the plan,
  6. To appraise periodically the progress,
  7. To make recommendations for its own effective working and regarding necessary changes.

Objectives of Planning:

When India became free, the economy was caught up in a Vicious circle of poverty’. It was characterized as underdeveloped and stagnant, marked by one of the lowest per capita consumption and income levels in the world, inequitable distribution of income and wealth, pre-dominance of backward forms of agriculture, weak industrial base and that too controlled by traders and money-lenders, high rate of population growth, rampant unemployment, scarcity of capital lack of entrepreneurs, and overall poverty, illiteracy and lack of scientific and technical personnel The main objective of the planning have been stated in different plan documents underline the following :

1. To build the industrial infrastructure,
2. To expand and improve agricultural production,
3. To lay down the foundations of a self-reliant and self-generating national economy,
4. To increase and distribute national wealth,
5. To promote social justice,
6. To remove unemployment and poverty,
7. To remove illiteracy and disease,
8. To promote trade and commerce,
9. To give incentives to entrepreneurs for export-oriented and import-substituting production, and
10. To make the Indian economy modern, efficient and competitive.

Comparing with other developing countries it is found that rates of growth of countries like China, Thailand, Malaysia, Egypt, Maxico and Brazil have been higher than India’s. But a more realistic index of growth is to see the rise of per capita income.

Moreover, India’s plans aim at increasing the national income. Each plan deals with comprehensive aspects of development, by establishing certain developmental priorities between different sectors of economy like heavy industry, light industry, agricultural irrigation, infrastructural services etc. To obtain required resources, plans lay down certain imperatives for mobilization of resources. These include imposition of taxes, regulation of private trade and industry through licensing policy, issue of foreign exchange permits and control of capital issues etc.

Since its inception, Planning Commission has so far prepared Five Year Plans, each focusing on different objectives, say, family planning, increasing employment opportunities, increasing Annual National Income by 5 per cent to 7 per cent, growth of basic industries (like, steel power, chemicals), maximum use of manpower resources, decentralization of economic power, reducing inequalities in income distribution, achieving social justice with equality, and so on. It could be said that the central objective of planning in India has been to raise the standard of living of the people and to open out to them opportunities for a richer and more varied life.

Economic Planning for Removal of Poverty:

1. Rapid economic growth : Rise in GNP, rise in GDP, improvement in quality of life, will ultimately lead to reduction of poverty. Fourth plan onward ‘Garibi Hatao’ and ‘Growth with justice’. Focus on raising living standard of the people.
2. Increase in employment : It was Assumed inherent in economic growth through increase in investment irrespective of choice of technique. Economic Planning for Social Change.
3. Reduction of inequality of incomes : Two aspect of equality as the result of traditional semi-feudal social formation and large disparities between rural and urban incomes.
4. Establishment of a socialist society : Inclusive of social and economic democracy -availability of opportunities for large mares of people irrespective of whether they are rich or poor – Economic Planning and Democratic Socialism.
5. Faith in democratic values for the enrichment of individual and common man’s life for self expression. A socialist society aims at the removal of poverty and the provision of a national minimum income. A socialist economic aims at the reduction of inequalities of income and wealth, through redistribution of income. A socialist economy aims at the provision of equal opportunities for all through provision of gainful employment for every able bodied citizen-raising investment level – expansion of rural industry along with urban.
6. Faith in mixed economy : A socialist economy endeavours to check concentration of economic power and the growth of monopolistic tendencies through:
   • Extension of the public sector into fields requiring establishment of large scale units and heavy investment.
   • Widening of opportunities for new entrants.
   • Setting up SMEs and cooperatives as well
   • Effective exercise of government power of control and regulation and use of appropriate fiscal measures.
7. The basic criterion of economic decisions in a socialist economy is not private profit but social gain. State controlled the commanding height of the economy through the public sector.

Nehru Mahalanobis Strategy of Planning:

1. Emphasized on development of basic industries so as to achieve long term goal of development.
2. A high rate of saving so as to boost investment.
3. Opted for protectionist path so as to safeguard infant industry.Encourage import substitution to achieve self-reliance.
4. Aimed at enlargement of opportunities for less privileged section of the society.
5. Assumed agriculture, light industries, private sector export to play supplemental role of so as not to limit the industrial progress.

Gandhian Model of Planning: Tried by Janta Government 1978-83.

1. Basic objective of the Gandhian model is to raise the material as well as the cultural level of the Indian masses so as to provide basic standard of life.
2. Aims to reform in agriculture so as to attain food-self sufficiency, and maximum regional self sufficiency in food.
3. Laid special emphasis on dairy farming as an occupation and as an auxiliary occupation to agriculture.
4. Attainment of self-sufficiency in village communities requiring rehabilitation, development and expansion of cottage industries along side agriculture.
5. Recognizes the need for and development of certain selected and key industries in India especially defence, hydro-electricity, thermal-power generation, mines, metallurgy machinery and machine tools, heavy. Employment-oriented planning to replace production-oriented planning.
6. To augnent Agriculture and employment potential of farm machinery.
7. Equitable distribution through decentralized small scale production.
8. In Gandhian Model distribution tackled at production end, not at consumption end.

LPG Model or Narsimha-Manmohan Model of Planning :

1. Areas hitherto reserved for public sector were opened to private sector
2. Government removed certain shackles to facilitate private investment, say removing license approval for establishing industrial units.
3. Abolishing the threshold limits of assets in respect of MRTP.
4. To facilitate FDI, government decided to grant approval for FDI above 51% in high priority areas.
5. Chronically sick PSU referred to BIFR for the formulation of revival/rehabilitation scheme along with social security mechanism for displaced workers.
6. Greater autonomy given to PSU managements and the boards of PSUs were made professional.
7. Economy opened to other countries to encourage exports.

Criticism of LPG Model :

1. Very narrow focus as corporate sector account for only 10% of GDP.
2. Bypasses agriculture and agro-based industries which are major source of employment.
3. Danger of labour displacement in light of larger role for MNCs.
4. Import window appeared too wide so as to invite larger trade gap.
5. Emphasis on capital intensive industries instead of labour intensive industries in light of growth of labour force at 2.2% per annum.

Mixed economy and planning

Three features :

1. Positive economic role of state.
2. Co-existence role of state.
3. Combined features of capitalism and socialism.

Planning Process in Mixed Economy:

1. The mixed economy was necessarily a planned economy so as to reconcile conflict of self-interest and social gain so that they subserve national interest.

Success of planning in mixed economy hinges on

1. To what extent public sector able to pursue the socially determined goal.
2. To what extent is the state able to guide the private sector to follow the socially determined goals?
3. To what extent is the state able to check the distortions in investment? Decisions arising out of private sector interest going against the public sector.

Government’s effort in this direction:

1. Deliberate promotion of defence, heavy and basic industry through larger resource allocation by the state.
2. Allocation of substantial portion of investment in creation of economic infrastructure in farm and irrigation work etc.
3. State control over financial institutions to direct investment in socially desirable channels.
4. Setting up of MRTP Commission.
5. Use of rationing and price control of essential commodities so as to ensure availability to weaker section of society.
6. Undertaking of special programmes to help the education and training of socially disadvantaged people.

India’s mixed economy pattern is based on the co-existence of public sector units and private sector, enterprises. Both the sectors work within the framework of the invisible hand of the market and the visible hand of planning. The role and scope of public sector has been spelt out in the two Industrial Policy Resolutions of 1948 adopted immediately after independence, and the 2nd Resolutions of 1956, adopted after the Avadi session of the congress, in which the ideal of the’ socialistic Pattern of Society’ was accepted and it was stated that for planned and rapid development of all industries of basic and strategic importance, and those in the nature of public utility services, should be in the public sector.

1. Public sector has not been developed for any ideological reason.
2. Private enterprise had neither the resource nor the skill nor the inclination to invest heavily in areas where returns would come much later, and lot of money would be locked up without immediate gains. State alone had the resources and the will to build the public sector.
3. Public sector units in a mixed economy has the exclusive responsibility for the development of public enterprises, which are used for developing heavy industries and infrastructural services. These include means of transport-railways, shipping, airways and road transport services; communications post, telegraph and telecommunication; irrigation facilitation energy sources, like coal petroleum, natural gas, electric power, atomic energy, etc and heavy industries iron and steel minerals and metals, chemicals, fertilizer and pharmaceuticals, heavy engineering, machine building etc.
4. The growth of public sector is one of the major contributions of the planning process. The Mahalanobis ‘Plan Frame’ (2nd Plan Period) stated that the development of heavy industries was essential to strengthen the foundations of economic independence.
5. In the mixed economy framework, private ownership of the means of production has been allowed Private Sector in India accounts for about80% of the total national output Apart from the basic infrastructural industries and service utilities all other industries are in private sector.
6. These include cotton textiles, jute, sugar, cement, vegetable oil leather, cosmetics, automobiles, scooters cycles, electronic goods and appliances etc. Agriculture the principal economic activity of 60% of people, is also in the private sector. The ownership of agricultural land is entirely personal.

Implications:

1. Plan targets have been unrealistically high. The implementation machinery has been weak and inadequate.
2. Bureaucracy and politicians have remained often uncommitted to the goals and purposes of planning.
3. There has been over-optimism in plan calculations. Corruption and inefficiency of administration. Resulted in neglect of projects and wastage of resources.
4. There has been inadequate use of irrigational facilities by the farmers.
5. The business community concerned with more of profit motives, could not develop a public spirit to help in plan implementation.
6. Religious and caste prejudices, social and educational backwardness of the bulk of the rural people, antagonism between the centre and states and general apathy of the citizens in development at activities contributed to the existence of the gap between proclamation and performance.

In this situation, planning in India reveals a contradictory pattern of growth and poverty, not of growth removing poverty.

Distortions in Planning Process:

The profit motive and the acquisitive spirit of the private sector on the one side and the inefficiency of the public sector on the other have resulted in serious distortion.The main distortions are :

1. Distortion of production structure due to persistence of inequality
2. Growth of unemployment due to failure to control rapid growth of population and emphasis on capital intensive production.
3. Failure of state to check concentration of economic power
4. Emergence of black economy or parallel economy in India
5. Failure to check the increase in prices
6. Failure to bring about a redistribution of income.
7. Failure of planning process to significantly reduce the proportion of people below poverty line.
8. If we make an appraisal of all the eight completed, we find that all our plans have been oriented towards something, sometimes self-reliance in agricultural production, sometimes employment, sometimes industrial growth, and so on. But poverty and unemployment have invariably increased. During the period of 48 years, the average rate of economic growth has been 3.5 per cent. During 1951-1998, our annual national income had increased by about 3.5 per cent, agricultural production by 2.7 per cent, industrial production by 6.1 per cent, and the per capita consumption by 1.1 per cent Though the government claimed that the number of people below the poverty line came down to 33 per cent in 1998 yet we cannot concede that poverty has decreased. No wonder, more people feel frustrated today and the number of agitations is increasing every year.

According to Ronald Lippit for success of a plan certain strategies have to be put into practice.

1. Development proposals and procedures should be mutually consistent,
2. Goals of development must be stated in terms that have positive value to the community,
3. Planners must have a thorough knowledge of the beliefs and values of the community’s culture,
4. Development must take the whole community into account,
5. Community must be an active partner in the development process, and
6. Communication and coordination between various agencies of development is essential.

The End of the Blog : The idea of Development Planning and Mixed Economy