TYPES OF PLANNING

BY: CELESTIAL C. ANDRADA

Economic planning is often regarded as technique of
managing an economy. When the structure of an economy
becomes complex and subject to rapid change and
transformation (due to population growth, discovery of
resources, industrialization, etc.) some sort of advance
thinking becomes necessary to resolve that complexity and
to prepare the economy for those changes. Such
preparation is called 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. Therefore, in democratic
planning, the state does not control all the means of production and does
not regulate economic operations of the private economy directly.
 the philosophy of democratic government is accepted as the ideological
basis. Under this type of planning, the decisions of the private sector are
influenced by incentives and partial controls through monetary and fiscal
policies. People are associated at every step in the formation and
implementation of the plan.
 is a planning by the people, for the people and of the people, the state
comes into the picture as a representative of the people but not as a
separate identity. The state government gives wide publicity to know the
opinion of the people and tries its best to seek the cooperation and active
support of the people in the country. It seeks to avoid all clashes and tries to
harmonies different opinions for the sake or welfare of the poor lots.
Characteristic 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 co-operation is sought in the preparation of the plan. There
is close relationship between welfare of the people and economic
activities.
 People’s co-operation is sought in the preparation of the plan. There is close
relationship between welfare of the people and economic activities.
 People’s co-operation is sought in achieving the targets of the plan by giving
them proper incentives.
 Economic activities are conducted both to earn profit and promote social
welfare.
 Under democratic planning there is importance both of price mechanism
and government-decisions.
 Objectives of public sector and private sector are coordinated.
 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.
 It has a tendency of decentralization.
 Its main objective is to raise the standard of living of the people quickly. As
such, consumer goods industries are given as much importance as heavy
industries.
DECENTRALIZED PLANNING
 responsibility lies with local and regional officials who take economic
decisions about the plan. 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.
 a plan is formulated by the central planning authority in consultation with the
different administrative units of the country. The central plan incorporates
plans under the central schemes, and plans for the states under a federal set-
up. The state plans incorporate district and village level plans. Under
decentralized planning, prices of goods and services are determined by the
market mechanism despite government control and regulation in certain
fields of economic activity.
 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.
PLANNING BY INDUCEMENT AND ITS
DEFECTS
 It means planning by manipulating the market. There is no
compulsion but persuasion. There is freedom of enterprise,
freedom of consumption and freedom of production. But
these freedoms are subject to state control and regulation.
People are induced to act in a certain way through various
monetary and fiscal measures. Thus, planning by
inducement is able to achieve the same results as are likely
to be achieved in planning by direction but with less
sacrifice of individual liberty.
REGIONAL AND NATIONAL PLANNING

Regional Planning
 deals with the efficient placement of land-use activities,
infrastructure, and settlement growth across a larger area
of land than an individual city or town. Regional planning is
a sub-field of urban planning as it relates land use
practices on a broader scale. . It also includes formulating
laws that will guide the efficient planning and
management of such said regions.
*A multi-jurisdictional geographic area, such as a
metropolitan area or a group of rural counties
*An area with common economic, environmental or
other conditions
National Planning
 analyse the country's objectives and priorities in relation to all these sectors in
response to well-identified national needs. It will propose and justify an overall
plan in which the role of individual sectors.
 The private sector looks for a stable and sympathetic environment in which to
invest securely and profitably. A national plan provides the evidence to
make positive decisions.
 In developing countries, a national plan also meets the need of the
international development banks and donor organizations to make loans or
to provide technical assistance to selected national projects with a clear
understanding of the benefits, and assured of the government's own
wholehearted commitment. Without them, a project has little meaning or
purpose. The national plan also enables these different organizations to
avoid wasteful overlap and competition by coordinating their respective
programmes.
FUNCTIONAL PLANNING AND STRUCTURAL
PLANNING
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.
FINANCIAL PLANNING
 Financial planning refers to the technique of planning in which
resources are allocated in terms of money. Financial planning is
essential in order to remove maladjustments between supplies and
demand and for calculating costs and benefits of the various
projects. Thus, Financial planning is thought to secure a balance
between demands and supplies, avoid inflation and bring about
economic stability.
 Financial planning helps in removing disequilibrium between
demand and supply to avoid inflation and to bring about
economic stability. Finance is the basic key to economic planning.
Without financial resources, physical targets cannot be achieved.
All objectives are fixed in terms of finance i.e, how much national
income, savings and investments are to be increased.
Financial Planning has the following
limitations:
 Mobilizing resources through taxation may badly affect the
savings.
 There are two sectors in underdeveloped countries i.e barter
and monetary system. There is imbalance between the two
sectors. It will lead to price-rise due to scarcities of supplies.
 No doubt supplies can be raised through imports but this will
lead to deficit in balance of payments.
 Financial planning is not suitable for the developing countries.
 Financial planning can be successful only if there are no
bottlenecks. That way, it is necessary to use sectorial planning
rather than over all planning.
PHYSICAL PLANNING IN TERMS OF
PRODUCTION
 Physical planning refers to the allocation of resources in terms of
men, materials and machinery. In physical planning, an overall
assessment is made of the available real resources such as raw
materials, manpower, etc., and how they have to be obtained so
that bottlenecks may be eliminated during the plan. Physical
planning requires the fixation of physical targets with regard to
agricultural and industrial production, socio-cultural and
transportation services, consumption levels and in respect of
employment, income and investment levels of the economy.
Physical planning has to be viewed as an overall long-term
planning rather than a short-term piecemeal planning.
Physical planning has the following
drawbacks:
 Lack of statistics

 Inconsistencies

 Inflationary Pressures
PLANNING IN MIXED ECONOMY

 A mixed economy is essentially a planned economy. The

public sector will have to be operated according to
certain priorities so as to achieve the specified social and
economic goals. At the same time, the State will direct and
control the private sector so as to secure better distribution
of ownership and control of material resources. The
planning process in a mixed economy is complex because
of divergent and often confliction set of motivations. The
conflicting motivations are those of self interest on the one
hand and social gain on the other. The purpose of
economic planning in a mixed economy is to reconcile the
confecting interests so that they sub serve the national
interest.
The success of planning in a mixed economy depends upon
the following factors:

 The extent to which the public sector is able to pursue the

social goals.
 The extent to which the State is able to guide the private
sector to follow these goals.
 The extent to which the State is able to check distortions in
investment decisions arising out of private sector interests
going against the public sector.
Limitations of Planning in Mixed Economy
 It brings about the fear of nationalization.

 It could risk the government to go too far.

 It observes lesser use of resources.

 It can lead to higher taxes.