Characteristics of Economic Planning
In a planned economy, major economic decisions such as what and how much is to be produced, when and where it is to be produced and to whom it is to be allocated will be determined by a central authority such as the State, through the Planning Commission.
And the Government will have the powers of implementation. Before the Plan is drawn up, a detailed survey of all available resources - physical resources, financial resources and human resources - has to be made. For example, in the former Soviet Russia, after the Revolution in 1917, there was War Communism between 1918 - 1921. And there was New Economic Policy (NEP) from 1921 to 1924. And from 1924, the Government made a detailed survey of all available resources and only in 1928, it implemented its First Five Year Plan. After the survey of resources, the objectives of planning will be determined. For example, one of the long term objectives of Soviet Planning was that Soviet Russia should catch up with the production levels of the leading capitalist nation of the world, namely U.S.A., in steel, coal and electricity. Keeping in mind, the objectives of the Five Year Plan, the physical targets will be fixed. And ways and means of mobilising financial resources will be explored. The Plan will also spell out the details in which the fruits of planning will be distributed in a fair and just manner.
The nature of planning is determined by the type of economic system - capitalism, socialism, mixed economy - in which it is practised.
There will be partial planning in a capitalist economy, (e.g., U.K.) but a socialist economy is a totally planned economy (e.g., Former Soviet Russia). In a mixed economy like India, both public sector and private sector play important roles in economic planning.
Usually, the period of a Plan is five years. The Plan has to be drawn in advance. It is done by the Planning Commission in India. A plan will be of a definite size and it will fix the targets for the Plan period and it will also indicate the ways by which the financial resources are to be mobilized for the Plan.
The first step in drawing up a Plan is to determine a growth target for an economy over the Plan period. The planners then divide the economy into a number of sectors such as agriculture, industry and service sector. The planners will fix the physical targets for the sectors and also decide how much investment must be made in each sector to achieve the targets. Then they will decide the right type of investment projects and production techniques. As the UDCs are poor, labour -intensive techniques will expand employment opportunities. But some heavy industries like steel have to be capital - intensive. The success or failure of a Plan depends upon the choices that are made.