Subject: Economic & Social Development
Topic: Economic Planning In India

Ques. 1 : What is planned economy?

Ans. Planned economy is one in which the state owns (partly or wholly) and directs the economy. While such a role is assumed by the State in almost every economy, in planned economies, it is pronounced: for example in communist and socialist countries- former USSR and China till the 1970’s. In such a case a planned economy is referred to as command economy or centrally planned economy or command and control economy. In command economies, state does the following

• Control all major sectors of the economy
• Legislate on their use and about the distribution of income
• State decides on what should be produced and how much; sold at what price
• Private property is not allowed

Ques. 2 : What is market economy?

Ans. In a market economy, it is the opposite- state has a minimal role in the management of the economy- production, consumption and distribution decisions are predominantly left to the market. State plays certain role in redistribution. State is called the laissez faire state here. It is a French phrase literally meaning “Let do.”

Ques. 3 : What is indicative plan?

Ans. Indicative plan is one where there is a mixed economy with State and market playing significant roles to achieve targets for growth that they together set. It is operated under a planned economy but not command economy.

Ques. 4 : Write down the difference between planned economy & command economy?

Ans. The difference between planned economy and command economy is that in the former there may be mixed economy and while in the latter Government owns and regulates economy to near monopolistic limit.

Command economies were set up in China and USSR, mainly for rapid economic growth and social and economic justice but have been dismantled in the last two decades as they do not create wealth sustainably and are not conducive for innovation and efficiency. Cuba and North Korea are still command economies.

Ques. 5 : Given an overview of History of Economic Planning in India?

Ans. India being devastated economically after more than two centuries of colonial exploitation resulting in chronic poverty. Eradication of poverty was the driving force for the formulation of various models of growth before Independence.

In 1944 leading businessmen and industria-lists (including Sir Purshotamdas Thakurdas, JRD Tata, GD Birla and others) put forward “A Plan of Economic Development for India” -popularly known as the ‘Bombay Plan’. It saw India’s future progress based on further expansion of the textile and consumer industries already flourishing in cities like Bombay and Ahmedabad. It saw an important role the State in post-Independent India: to provide infrastructure, invest in basic industries like steel, and protect Indian industry from foreign competition.

Visionary engineer Sir Mokshagundam Visvesvarayya pointed to the success of Japan and insisted that ‘industries and trade do not grow of themselves, but have to be willed, planned and systematically developed’ — in his book titled “Planned Economy for India” (1934) Expert economists and businessmen were to do the planning. The goal was poverty eradication through growth.

The Indian National Congress established a National Planning Committee under the chairmanship of Jawaharlal Nehru. It (1938) stated the objective of planning for development was to ensure an adequate standard of living for the masses, in other words, to-get rid of the appalling poverty of the people”. It advocated heavy industries that were essential both to build other industries, and for Indian self- defence; heavy industries had to be in public ownership, for both redistributive and security purposes; redistribution of land away from the big landlords would eliminate rural poverty.

During the 1940’s, the Indian Federation of Labour published its People’s Plan by MN Roy that stressed on employment and wage goods. SN Agarwala, follower of Mahatma Gandhi published Gandhian Plan that emphasized on decentralization; agricultural development; employment; cottage industries etc.