Question

Describe the case for planning.

Answer 1

The economic planning is justified on the following grounds.
(1) To accelerate and strengthen market mechanism:

• The market mechanism works imperfectly in underdeveloped countries because of ignorance and unfamiliarity with it. A large part of the economy comprises the non-monetized sector.

(2) To remove unemployment:

• Capital being scarce and labour being abundant, the problem of providing gainful employment opportunities to an ever-increasing labour force is a difficult task.

(3) To achieve balanced development:

• In the absence of sufficient enterprise and initiative, the planning authority is the only institution for planning the balanced development of the economy.
• (a) Development of Agriculture and Industrial Sectors: The need for developing the agriculture sector along with the industrial sector arises from the fact that agriculture and industry are interdependent.
• (b) Development of Infrastructure: The agriculture and industrial sectors cannot develop in the absence of economic and social overheads. The building of canals, roads, railways, power stations, etc., is indispensable for agricultural and industrial development.
• (c) Development of Money and Capital Markets: The expansion of the domestic and foreign trade requires not only the development of agricultural and industrial sectors along with social and economic overheads but also the existence of financial institutions.

(4) To remove poverty and inequalities:

• Planning is the only path open to underdeveloped countries, for raising national and per capita income, reducing inequalities and poverty, and increasing employment opportunities.