Q.Distinguish between indicative planning and imperative planning.
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Start your 14-day free trial to unlock the full solution →Imperative planning, also called directive or authoritarian planning, is the style of planning typical of a centrally planned or socialist economy, such as the erstwhile Soviet Union. Under imperative planning, the state itself fixes production targets, prices, resource allocation and even employment for both the public and the private sector, and these targets are backed by the force of law -- private enterprises have little or no discretion to deviate from the plan.
Indicative planning, which suits a mixed or market economy, works differently. Here the state sets broad national priorities and targets, and directly controls investment and production only in the public sector. The private sector is not compelled to comply; instead, it is guided and incentivised to move in the desired direction through instruments such as taxation, subsidies, credit policy, industrial licensing (where it exists) and public investment that crowds in private investment. The state essentially indicates the direction it wishes the economy to take, and relies on market signals and incentives, rather than legal compulsion, to bring private decision-making broadly into line with national priorities. …
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