2. Indicative Planning

In the following two decades after the soviet planning commenced, the idea of planning got attention from the democratic world. A time came when some such economies started national planning. As they were neither state economies nor communist/socialist political systems, the nature of their planning was different from the command economies. Such planning has been termed as indicative planning by economists and experts. The identifying features of indicative planning may be summed up as under:

(i) every economy following the indicative planning were mixed economies.

(ii) unlike a centrally planned economy (countries following imperative planning) indicative planning works through the market (price system) rather than replaces it.15

(iii) side by side setting numerical/quantitative targets (similar to the practice in the imperative planning) a set of economic policies of indicative nature is also announced by the economies to realise the plan targets.

(iv) the indicative nature of economic policies, which are announced in such planning, basically encourage or discourage the private sector in its process of economic decision making.

After converting to a mixed economy by the mid-1940s, France

commenced its first six year plan in 1947, which got popularity as the Monnet Plan (he was the first chairman of the General Planning Commission and the then Cabinet Minister for planning in France).16 Later, Monnet Plan became synonymous with indicative planning. This plan is also sometimes described as the basic sector planning as the government had selected eight basic industries as the core of development in which the nature of planning was almost imperative, i.e., under state monopoly (these sectors were owned by the private sector till 1944 when France went for their nationalisation).17 Other economic activities were open for private participation for which indicative kind of policy-planning was essential. France as well as Japan have followed indicative planning with great success. It was in 1965 that the UK commenced such a planning with the National Plan and abandoned in 1966 after being overtaken by events (a balance of payment crisis resulting in a deflationary package of measures). Since then the UK never went for planning.18‌‌

Though the first use of economic planning as an instrument of economic progress was done by the USA (with the Tennessee Valley Authority in 1916 at the regional level), it never went for a formal national planning. In the 1940s, some economists had suggested in favour of the use of national planning. We may have a reflex of indicative planning in the USA if we look at the Presidential Reports which come after regular intervals. These reports are just ‘benchmarks’ in the area of resource utilisation and governmental announcements of its objectives—basically trying to motivate the private sector towards the area of public objectives. The indicative planning as it is practised by the mixed economy, any growth target could only be achieved once the public and the private enterprises worked in tandem. This is why besides the plan targets, the governments need to announce some set of indicative policies to encourage and motivate the private sector to accelerate their economic activities in the direction of the plan targets.

After the Second World War, almost all the newly independent countries adopted the route of planned development. Though they followed an overall model of the indicative planning, many of them had serious inclination towards imperative planning. As in the case of India, the heavy bias towards imperative planning could only be reformed once the process of economic

reforms was started in 1991.

Today, as there are mostly only mixed economies around the world, any country’s development planning has to be only of the indicative type. After the revival of the role and the need of market in promoting growth and development via the Washington Consensus (1985), the World Trade Organisation (1995) and the Santiago/New Consensus (1998) only indicative planning has remained possible with the state playing only a marginal role in the economy, especially in the areas of social importance (i.e., nutrition, healthcare, drinking water, education, social security, etc.).

There are still many other types of planning depending upon the point of view we are looking at. For example, from the territorial point of view, planning could be regional or national. From the political point of view planning could be central, state or local. Similarly, from the participatory point of view, planning has been categorised into centralised and decentralised. Again, from the temporal point of view planning could be long-term or short-term (in relative sense). Finally, from the value point of view planning could be economic or developmental.

A major classification of planning is done on the basis of societal emphasis. The type of planning which gives less emphasis upon the social and institutional dimensions is known as systems planning. In such planning, the planners just search for the best possible results in relation to the established goals giving less importance to issues like caste, creed, religion, region, language, marriage, family, etc. Opposed to it, the normative planning gives due importance to the socio-institutional factors. This is a planning from social-technical point of view, but only suitable for a country which has lesser degree of social diversities (naturally, not fit for the Indian conditions). But in the coming years there was a shift in the very thinking of policymakers. The Economic Survey 2010–11 is probably the first document of the Government of India which advocates the need for a normative approach to planning in India. It is believed that until a programme/scheme run by the governments are not able to connect with the customs, traditions and ethos of the population, their acceptability will not be of the desired level among the target population. Establishing an empathic relationship between the programmes/schemes and target population is now considered an important aspect of planning and policymaking. Such a change in the

thinking is based on the experiences of India and other countries of the world.

In January 2015, the Government of India replaced the erstwhile body, Planning Commission, by the NYTl Aayog (a policy think tank). If we look into the functions and guiding principles of the new body we come to know that India has officially moved towards normative planning— the new body has to follow a development model which is ‘all round, all pervasive, all inclusive and holistic’. In this process the NITI Aayog has been further asked to enable the country to draw on the vitality and energy of the bedrock of our ethos, culture and sustenance.

The Economic Survey 2015–16 points out how the government has come to recognise the importance of influencing social norms in a wide variety of sectors, such as:

(i) persuading the rich to give up subsidies they do not need,

(ii) reducing social prejudices against girls,

(iii) educating people about the health externalities of open defecation, and

(v) encouraging citizens to keep public spaces clean.

Today, governments all over the world have embarked on systematic ways of studying how to promote behavioural change. The importance and need of behavioural change were highlighted by the World Development Report 2015 (World Bank), too. All such policy interventions are examples of normative policymaking.

Economic planning is classified into more types—sectoral and spatial. In sectoral planning, the planners emphasise the specific sector of the economy, i.e., agriculture, industry or the services. In spatial planning development is seen in the spatial framework. The spatial dimensions of development might be defined by the pressure and requirements of national economic development. Indian planning has been essentially —single level economic planning with a greater reliance on the sectoral approach though the multi- level regional and normative dimensions are being increasingly emphasised since the early 1990s.

1. S. R. Maheshwari, A Dictionary of Public Administration, Orient Longman, New Delhi, 2002,

p. 371.

2. Planning Commission, First Five Year Plan (1951–56), Government of India, New Delhi, 1991, p. 7.

3. After the emergence of the concept of Sustainable Development (1987) experts across the world started using the term ‘optimum’ in place of the hitherto used term ‘maximum’.

4. Michael P. Todaro, Development Planning: Models and Methods. Oxford University Press, Nairobi, 1971.

5. United Nations Department of Economic Affairs, Measures for Economic Development of Underdeveloped Countries, UNO, DEA, New York, 1951, p. 63.

6. The Gosplan, First Five Year Plan (1928–33), USSR, 1928.

7. Many of the PSUs in the 1950s and the early 1960s were not only set up with natural resources (capital as well as machines) from USSR, Germany, etc., but even the human resource was also tapped from there for few years.

8. Though the USA was the first to go for planning, but at the regional level (Tennessee Valley Authority, 1916)—it never announced its intention for national planning.

9. Leong, G.C. and Morgan, G.C., Human and Economic Geography, Oxford University Press, Oxford, 1982,

p. 145.

10. Alec Nove, An Economic History of the USSR, 3rd ed., Penguin Books, Baltimore, USA, 1990, p. 139.

11. Rakesh Mohan ‘Industrial Policy and Controls’ in the Bimal Jalan (eds), The Indian Economy: Problems and Prospects, Penguin Books, New Delhi, 2004., p. 101. Also see Bipan Chandra et. al., India After Independence, Penguin Books, New Delhi, 2000, pp. 341–42, as well as A. Vaidyanathan, ‘The Indian Economy Since Independence (1947–70)’ in Dharma kumar (ed.), The Cambridge Economic History of India, Vol. II, Cambridge University Press, Cambridge, 1983, pp. 949– 50.

12. Samuelson, P. A. and Nordhaus, W. D, Economics, McGraw-Hill Companies Inc., N. York, 2005., p. 591.

13. From Poland two great economists Oskar Lange (1904–65) and Michal Kalecki (1899–1970); from Hungary, William J. Fellner (1905–83), Nicholas Kaldor (1908– 86), Thomas Balogh (1905–85) and Eric Roll (1907–95); from post-war Austria Ludwig von Mises (1880–1973), Friedrich A. von Hayek (1899–1992), Fritz Machlup (1902–83), Gottfried Haberler (1900–96) and Joseph A. Schumpeter (1883–1950) [J.K. Galbraith, A History of Economics, Penguin Books, London,

1987, pp. 187–90].

14. It was blasphemous to preach in favour of market in the socialist world at that time—he was not put behind the bars was a great mercy on him. Oskar Lange towards the end of his life told Paul M. Sweezy, the most noted American Marxist scholar, that during this period he did not retire for the night without speculating as to whether he might be arrested before the dawn (J.K. Galbraith, A History of Economics, p. 189).

15. Collins Internet-linked Dictionary of Economics, Glasgow, 2006.

16. George Albert Steiner, Government’s Role in Economic Life, McGraw-Hill, New York, 1953, p. 152.

17. India had a French influence on its development planning when it followed almost state monopoly in the six infrastructure industries also known as the core or the basic industries, i.e., cement, iron and steel, coal, crude oil, oil refinery and electricity.

18 . Though the planning agencies the National Economic Development Council (NEDC) and the Economic Development Committees (EDCs) continued functioning, it was in 1992 that the NEDC was abolished (Collins Dictionary of Economics, 2006).