What is Planning?
Planning is a process which involves thinking about all the activities that are required to achieve the required goals.The process of planning encompasses the following:
?Identification of the goals or objectives to be achieved;
?Checking on the availability of the resources;
?Arrangement of the means required to achieve them;
?The final step involves keeping a check on the implementation of all the steps in a sequence.

How important is Planning?
• We often  do not realize that ‘Planning’ is an  indispensable part of our lives. Each minute we  are planning something or the other.
• From managing our time to reach office early to scheduling out work at office, to trying to be  on time at a late evening party to reaching home back, every step implicitly involves  planning.
• It is  not wrong to say that from the smallest of decisions to the biggest , each one starts off  with planning.
• This automatically makes us realize  the essentiality of planning in our lives .
• After having understood the meaning of Planning.

The types of planning can be categorized into the following:
Based on the levels:
Planning can be done at the  local level, national level or at the international level.

Based on the domains:
• Planning can be done based on the domain involved like  Economic planning , Social planning,  Land use planning, Policy planning, Environmental planning, Rural planning, Urban planning,  Strategic Planning, Regional Planning etc.
• Here we can see that the concept of planning narrows or becomes more specific when we  apply it to a particular domain.

Based on the center of power:
• Planning can be  Centralized or Decentralized based upon the  power wielding authority and  the level of implementation.
• In the case of Centralized planning, there is a  single authority that takes all the major  decisions and decides each and every step of the planning process. The other players are  required to just implement the plan laid by  the central authority.
• In the case of Decentralized planning,  all the players involved give an equal amount of input  in the chalking of a plan. The decisions are not in the hands of a single authority.

Based on Nature of Planning:
• Planning can be  Formal or Informal based on the nature of the process.
• Planning is formal when it is reduced to writing . When the numbers of actions are large it is  good to have a formal plan since it will help adequate control. The term formal means official  and recognized.
• An informal plan is one,  which is not in writing , but it is conceived in the mind of the  manager. Informal planning will be effective when the number of actions are less and actions  have to be taken in short period.

Based on duration of planning:
• Planning can be  Short Term or Long Term based on the  duration involved.
• Short term planning is generally considered as  tactical planning .Short term plans are  concerned with immediate future and it takes into account the available resources only.
• Long term planning is generally considered  strategic planning . It usually involves a number  of years. It takes usually involves future planning and takes into account all the probable  resources: near term and long term.

What is Economic Planning?
• Economic Planning is the  making of major economic decisions like  What and how is to be  produced and  to whom it is to be allocated – by the conscious decision of a  determinate  authority , on the  basis  of a  comprehensive survey of the economic system as a whole.
• The meaning of economic planning  differs from country to country and  person to pers on.  Keeping in view the various definitions we can say that  aim of all the plans is to  utilize the  available resources more  effectively achieving the  well - defined objectives during given  period of time.

Why do we need Economic Planning’?
• We can infer that the  resources that are available at our disposal are very  limited. This is in  general true for any resource that we take, be it economic or natural.
• Now when  compared to the resources, the users are more . This leads to a  competition  among the users to acquire the available limited resources. This also happens because the desires of humans are unlimited. They always have a tendency to acquire more as they  move forward in life.
• Now we can see that this  mismatch between the users and resources in the backdrop of  unlimited desires gives rise to a  major problem.
• How do we  allocate the available limited resources among the competing users?
• There is a  need to setup certain systems that would take the responsibility of doing the  aforementioned job.
• These systems would  through various institutions  come out with various  processes to  implement a proper plan to meet the objective of effective allocation of resources. Here comes the  need for ‘PLANNING’ and or that of ‘Economic Planning’ based on the  domain involved.

Types of economic systems:
•Capitalism (Market Economy)
•Socialism (Planned Economy)
•Mixed Economy (Capitalism + Socialism)

Market Economy:
• A market economic system  relies on free markets and  does not allow any kind of  government involvement in the economy.
• In this system,  the government does not control any resources  or other relevant economic  segments.
• Instead, the entire system is regulated by the people and the law of supply and demand.  For example, if bicycles are in demand, bicycles will be produced.
• In a capitalist society the  goods produced are distributed among people not on the basis of  what people need but on the  basis of Purchasing Power— the ability to buy goods and  services. That is, one has to have the money in the pocket to buy it. Low cost housing for the  poor is much needed but will not count as demand in the market sense because the poor do  not have the purchasing power to back the demand. As a result this commodity will not be  produced and supplied as per market forces.

Planned Economy:
• In a socialist society the  government decides what goods are to be produced in accordance  with the needs of society. It is assumed that the government knows what is  good for the  people of the country and so the  desires of individual consumers are  not given much  importance.
• The  government decides how goods are to be  produced and how they should be  distributed. In principle, distribution under socialism is supposed to be based on  what  people need and not on what they can afford to purchase.
• Unlike under capitalism, for example, a socialist nation provides free health care to all its  citizens. Strictly, a socialist society has no private  property since everything is owned by the  state.

Mixed Economy:
• Most economies are mixed economies, i.e. the  government and the market together will  decide  what to produce, how to produce and how to distribute what is produced.
• In a mixed economy, the market will provide whatever goods and services it can produce  well, and the government will provide essential goods and services which the market fails to  do.
• India is an example of a mixed economy.

Mixed Economy in India:
• India is regarded as a good example of a mixed economy.
• Under the  Directive Principles of the Indian Constitution, it has been laid down that the  State should strive “to  promote the welfare of the people by securing and protecting as  effectively as it may a social order in which justice, social, economic and political, shall inform  all the institutions of national life.”
• In the  economic sphere, the State is to direct its policy to secure a better distribution of  ownership and control of the material resources of the community and to prevent concentration of wealth in the hands of a few and the exploitation of labor.
• It would be impossible for the State to attain these ends implied in the directive principles  unless the State itself enters the fields of production and distribution.
•This explains the rationale behind of economic planning. To protect the weaker sections, the  State is also expected to control the distribution of essential commodities.
• Similarly, by controlling the financial system, viz., insurance and banking, the State can endeavor to direct investment in socially desirable channels.
• Besides, in a developing country like India, market forces based on profit motive cannot, by  themselves, induce the private sector to move into infrastructural development (which  involves heavy capital investment, long gestation period, low rate of return, etc.)
• Accordingly, the State has to promote infrastructural facilities like hydro-electric projects,  irrigation; road and railway transport, and have to create conditions conducive to a higher  level of investment so that national and per capita incomes of the people can be improved  continuously.

Type of Economic Planning:
Democratic Planning:
• Democratic Planning  implies a system of economic order in which the authority that vests in  the state is based on the support of common masses.
• In democratic planning, the state does not control all the means of production and does not  regulate economic operations of the private economy directly.
• In democratic planning, the plan is fully debated in the Parliament, state legislature and in  the private forums.

Features of democratic planning:
• As a consequence of democratic planning, mixed economy comes into being. Public and Private Sectors operate side by side.
• Central Planning Authority has direct control over Public Sector.
• Private sector is indirectly controlled by the Central Planning Authority in the national  interest through fiscal and monetary measures.
• People enjoy economic, social and religious freedom. People have freedom to conduct such  economic activities as consumption, production, exchange, investments etc. in the national  interest and social welfare of the community as a whole.
• People’s cooperation is sought in  the preparation of the plan. There is close relationship  between welfare of the people and economic activities.
• Economic activities are conducted both to earn profit and promote social welfare.
• It is quite a flexible planning. There is enough scope to modify- the targets of private sector.  Targets of Public Sector are subject to change according to changed circumstances.

Totalitarian (authoritarian) planning:
• When planning is adopted under a dictator, it is called totalitarian planning.
• Under this planning, state fully controls the economic affairs, productive resources and  economic decisions.
• The state is the final authority in allocating the productive resources and it determines in  accordance with the directions of the central authority.
• The profits or production instead of being pocketed by the private capitalists go to the state  for ameliorating the problems of the poor lots in the country.
• Totalitarian  planning shows the complete socialization of entire national economy. Under  such planning, plans are formulated, controlled, financed and executed by the state and  people have to do nothing in it.

Features of totalitarian economy:
• Public sector alone functions in this type of planning. Government has full and direct control.
• Central Planning Authority formulates a comprehensive plan for the entire economy.
• There is no economic freedom and all economic decisions are taken by the government.
• People’s welfare can be sacrificed at the altar of rapid economic development of the country.  Minimum needs of the people alone are catered to.
• It is a rigid planning. People can be pressurized by the government for the achievements of  the plan- targets.
• It is more comprehensive and efficient.

Centralised planning:
• The framing, adopting, executing, supervising and controlling the plan is done by central  planning authority.
• Planning authority determines targets and priorities. It is the duty of the planning authority  to bring harmony in the planning process.
• This type  of planning comes from the top to the bottom. This plan determines the equality  and cohesion. The central planning authority determines the basic policies in view of the  regional and local needs.
• Scholars criticized centralized planning as it is not democratic in nature and character. The  complete process of planning is regulated and controlled by authority.
• This planning is inflexible due to which it has less adaptability. There is no economic freedom  at all. Further, the disequilibrium arising on account of centralized planning cannot be easily  corrected.

Centralized planning:
•The framing, adopting, executing, supervising and controlling the plan is done by central  planning authority.
•Planning authority determines targets and priorities. It is the duty of the planning authority  to bring harmony in the planning process.
•This type  of planning comes from the top to the bottom. This plan determines the equality  and cohesion. The central planning authority determines the basic policies in view of the  regional and local needs.
•Scholars criticized centralized planning as it is not democratic in nature and character. The  complete process of planning is regulated and controlled by authority.
•This planning is inflexible due to which it has less adaptability. There is no economic freedom  at all. Further, the disequilibrium arising on account of centralized planning cannot be easily  corrected.

Decentralized Planning:
• Under this planning, responsibility lies with local and regional officials who take economic  decisions about the plan. In other words, this planning starts from the grass roots.
• In other words, this type of planning is from bottom to top. Under this, plan is framed by the  central planning authority by consulting different administrative units of the country.
• The plan incorporates plans under central, state and local schemes. Also  plans are prepared  for different industries too. But individual firms are free to take their own decisions about  investment and output. Prices are determined by market mechanism even though there are  government controls.
•There is complete economic freedom  in consumption, production and exchange.
• The main defect of decentralized planning is that there is no uniformity and coordination  among different sectors of the economy. This plan has been adopted in England and France.

Functional planning:
• Under functional planning, there is no need to build up new structure, rather the existing  structure is corrected and modified.
• According to Zweig in his “The Planning of Free Societies’ has stated “Functional planning will  only repair, not build a new, it will improve the wave of the existing order, but not supersede  it.
• It is a conservative, or rather evolutionary type of planning which will not over turn the  existing structure and moves only within its narrow border”.
• Thus functional planning brings no change in the economic and social set up.

Structural Planning:
• In this type of planning the present social and economic structure is changed and a new structure emerges.
• In the developing countries, there is a structure planning. Big economic and social changes  are brought about to usher into a new system.
• For instance, shift from capitalist to socialist economy can be called a structural change. Structural planning can help in accelerating the pace of economic development. The  Communist countries like Russia and China followed structural planning.

Perspective Planning:
• Perspective planning is a long run planning where targets are fixed for long periods, for  example 15 to 25 years.
• But a perspective plan cannot mean one plan for the complete period. In a true sense,  broader objectives are to be achieved in a fixed period by dividing the perspective plan into  short- run plans of 4 to 6 years.
• The long-run objectives are so divided into short- run that one by one all the objectives are  achieved in the long-run. In other words, short run plans pave way for the achievement of  long run motives.
• The perspective plan has so many administrative difficulties due to which the fulfillment of  the objectives becomes difficult.

Annual Planning or Prospective Planning:
• Annual Planning or short-term planning refers to 4 to 6 years plans which are further divided  into annual plans so that each annual plan may fit in short-run plan and each short-run plan may ultimately fit in the long- run plan.
• Plans are further divided into regional and sectional plans. Regional plans are linked with  regions, district and localities which are further divided into sectional plans for agriculture,  industry, transport, foreign trade etc.
• The sectional plans are again divided for different b ranches like iron and steel, food-grains,  exports etc.

Indicative Planning
• Indicative plan is not imperative but flexible.
• Indicative planning is peculiar to the mixed economy of France. But this is quite different  from the type of planning which exists i n other mixed economies.
• By mixed economy, we mean simultaneous working of public and private sector. It is the  state which controlled the private sector in different ways, i.e. by quotas, price, licenses, etc.
• But under indicative planning, the private  sector is not rigidly controlled to achieve the  targets and priorities of the plan.
• The state gives full assistance to private sector but does not control it. It, rather, directs the  private sector in certain areas to implement the plan.
• This plan was used in France from 1947-50 as Monnet Plan. France’s experience shows that  the firms do not play the game when development programme does not coincide with profit  expectations.
• Generally monopolistic firms do not bother about government policies and use their  power  for personal benefit. Same way under inflationary pressures, the government resorts to  direct controls rather than maintaining prices mechanism through monetary and fiscal  policies.

Imperative Planning:
• It refers to that where all economic activities and resources of the country operate under the  direction of the state. The resources are optimally used by the state in order to achieve the  targets of the plan. Consumer’s sovereignty is sacrificed under this type of planning.
• The consumers get fixed quantities at fixed prices. The government policies are rigid which  cannot be changed easily. Any change can adversely affect the economy.

Rolling Planning:
• Rolling plan was advocated by Prof. Myrdal for the development of developing countries. India experienced it for the first time in April 1978 under Janata Party rule and continued up  to April 1980.
• In the rolling plan,  every year, three new plans are made :
? There is a plan for the current year which includes annual budget and the foreign exchange budget,
? There is a plan for number of years for example 3 to 5. It is changed every year keeping in  view the needs of the economy,
? A perspective plan for 10 to 20 years or more is presented where broader goals are stated.  The annual plan is fitted into same year’s  new 3 to 5 years plan and both are framed in the  light of perspective plan.
• Rolling plan is framed with a view to remove rigidities. It considers the unforeseen changes  like natural calamities or economic changes. Under this financial and physical targets  are  revised.
• In this way, the rolling plan gives the benefits of both perspective and flexible planning.
• But under rolling plan, long-term subjective cannot be achieved since the targets are revised every year. Such changes cannot maintain proper balances in the economy so as to achieve  balanced development.
• Moreover, frequent revision of the plan leads to uncertainties between both the public and  private sectors. Further revisions of the targets make the attitude non-committal.
•This plan has been successful in Poland and Japan, but it failed in Mexico and Burma.

Fixed Planning:
• Fixed planning is for some fixed period, say four or five or six or seven years. A fixed plan  fixes definite objective which have to be achieved during the plan period.
• Physical targets and financial outlays do not change except under emergencies. Under this  plan, targets are achieved which are laid down in the plan.
• This plan helps in maintaining proper balance in the economy.
• Further, there is no uncertainty in this type of planning.
• Fixed plan, with given objectives, ensures public cooperation. This type of planning needs  political will for its successful implementation.

Socialistic Planning:
In socialistic planning, the economy depends on economic planning. The central authority  formulates a plan for the entire economy.

Capitalistic Planning:
Capitalistic planning is focused on  the unplanned economic order which gains momentum from  some invisible forces in the market. The main feature of this type of planning is the absence of a  central economic plan.