Question

Discuss the pros and cons of indicative planning .

Do you think a process of indicative planning should be used in the United States? Do we already have anything like it?

Answer 1

Indica­tive planning or planning by inducement is found in capitalist countries as well as in mixed economies, like India. After the termi­nation of the Second World War (1939-45), indicative method of planning was advocated in capitalist countries. Indicative planning was attempted first in France. French planning had some sort of success as it attempted to fulfil the desires and expectations of the people with no force or compulsion.

Thus, the essence of indicative planning is that it recognises not only consumers’ sovereignty but also produc­ers’ freedom so that the targets and priorities of the plans are achieved. It then involves a middle path of planning mechanism and mar­ket mechanism—a kind of coordination be­tween private and public activities.

India’s Eighth Plan was unique in the sense that it attempted to manage the transition from a centrally planned economy to a market-ori­ented economy without tearing the socio-cultural framework of the country, or to be more specific, our social commitments to the under- previliged sections. The Eighth Plan men­tioned that planning would have to be reoriented so as to make it indicative.

Under indicative planning those industries and sectors are identified where future growth is to be encouraged. Its endavour will be to develop the core sector through allocation and optimal utilisation of funds. The plan must provide the broad blueprint for achieving the essential social and economic objectives and indicate the direction in which the entire economy as well as its various sectors and sub- sectors should be moving.

Thus, identification of these areas and channelling the resources to those areas are an integral part of planning. The Eighth Plan concentrated on building a long term strategic vision of the future and set forth the priorities of the country.

On the one hand, for the public sector, the Eighth Plan in­tended to examine in details the alternatives and identify the specific projects in various sectors. On the other hand, for the rest of the economy, it worked out sectoral targeted and tended to provide promotional stimulus to the economy to grow in the desired direction.

This means that under indicative planning, the central planning authority in India’s case, the Planning Commission plays an in­tegrative role and helps in the development of a holistic approach to policy formulation in certain critical areas of development like en­ergy, human resource development, manage­ment of balance of payments, etc. But indica­tive planning does not intend to reduce the importance of the role of the state.

The state shoulders primary responsibility for the de­velopment of both physical infrastructures and social infrastructures. Besides, central plans are linked up with the state plans since both the partners have responsibilities in all the areas. This indicative planning is tanta­mount to corporate planning. Finally, the plan­ning authority plays a mediatory and facilitating role for managing the economy.

Keeping all these features of indicative planning in mind, we can say that India’s Eighth Plan is unique in relation to earlier plans. It assigns a special role and respon­sibility to planning. “It is a plan to salvage the process of planning and to reorient it to meet the needs of a vastly changed national and international scenario. It is more a manager’s plan than an abstract economist’s plan of cli­ches and pious wishes.” This kind of planning goes on and the Eleventh Plan is in progress.

(ii) Advantages:

Indicative planning has one distinct advantage. It supposedly increases productivity because each sector of the economy pushes its own contribution to a point that previously would have been con­sidered too dangerous. This is achieved with­out abolition of the private enterprise, with­out command and without sacrificing any one of the advantages of the market economy.

Indicative planning is, thus, a perfect compro­mise a system between freedom and planning that enjoys the advantages of both the market and the planned economies, while successfully avoiding the disadvantages usually connected with these pure systems.