Meaning, Need and Essential Features of Economic Planning

Economic planning is the deliberate, conscious direction and coordination of a country's economic activity by the state, according to a pre-determined plan, with the aim of achieving specific economic and social objectives within a specified period.

Developing countries in particular have historically turned to planning because market forces alone, left unguided, often fail to achieve the pace and pattern of development a newly independent or developing economy needs. Planning has been used to: mobilise and direct scarce resources (capital, skilled labour, foreign exchange) toward priority sectors; build infrastructure and heavy industry that private investors may consider too risky or too slow to yield returns on their own; correct regional and social imbalances that market forces alone tend to widen rather than narrow; and set clear, measurable national targets (for output, employment, literacy, and so on) against which progress can be tracked.

A sound economic plan typically has certain essential features:

1. Clearly defined objectives — the plan states, in advance, what it aims to achieve (e.g. a target rate of growth, a target level of employment).
2. A specified time period — plans are almost always time-bound (commonly five years), so that performance can be reviewed against the original targets.
3. A central planning authority — a body responsible for formulating the plan, allocating resources, and monitoring implementation. …