Types of Planning: Centralised and Decentralised (Indicative) Planning

Economic planning is broadly classified into two types, based on how much control the state exercises over economic decisions:

Centralised (or command) planning is where the state owns the principal means of production and takes virtually all major economic decisions itself — what is to be produced, how much, and at what price — through a single central planning authority whose targets are compulsory and binding on every producing unit. Private enterprise plays little or no independent role. The former Soviet Union's planning system is the classic historical example of this type.

Decentralised (or indicative) planning, by contrast, operates within a fundamentally market-based economy. The central plan sets out broad national targets and priorities, and uses fiscal incentives, credit policy, public investment and persuasion to guide private enterprise toward those priorities — but private producers remain free to make their own production and investment decisions, and the plan's targets are suggestive rather than compulsory for the private sector. Public investment and direct state control are typically reserved for a smaller set of strategic sectors, while the rest of the economy responds mainly to market signals nudged by plan incentives. …