Discuss determination of plan objective and formulation of plans and projects.

Objectives of Economics Planning

Planning is always adopted to achieve certain objectives. These objectives are not the same for all countries and nor even the same for a country at all times. They are determined in the light of prevailing economic situation and are changed according to new problems arising from time to time. Objectives of planning depend upon the stage of economic development and socio-political conditions. The important objectives commonly found in plans of different countries are:-

Objectives Of Planning

1.               To achieve full employment

2.              Maximizing national income and raising the living standards

3.              Rapid industrialization (Increase N.I, employment)

4.              Self sufficiency in food and raw materials

5.               Reduction of inequalities

6.              Reducing imbalance in the economy.

7.               Better utilization of natural resources

8.              Price stability

9.              Distribute justice

10.           Control of monopolistic tendencies

11.            Defense of country

12.           Creating of job opportunities.

Formulation of a development plan

The following are essential steps in the formulation of a development plan:

1.               Fixation of objectives

2.              Length/Plan period

3.              Size of plan

 1. Fixation of objectives

The objectives are described by the politicians of the country. A socio-economic survey is made based o which the objectives are formulated. Some time the objectives are:-

a.     Complementary: services to the social people

b.     Conflicting: rapid industrialization and implantation social sector. The objectives are planned according to the available resources in the country.

2.   Length /Plan period

After deciding the objectives the plan period fixed up it is also known as planning horizon. Generally the plans are formulated for 5 yrs. The minimum period may be 1 years. Plan period should neither be too long nor too short. If the plan period is long, than it is difficult to sort out the objectives. Because the population and tends of people change with the passage of time. If the plan is too short then it is difficult to get meaningful results. Therefore, the period of the plan should be within certain limits.

            Short term plan: It is highly flexible. Easy to make, implement. Example heath

Long-term plan: Very well conceived, well planned and important on very reliable information e.g. defense.

3.   Size of plan

The size of the plan is determined by its magnitude of investment which has to be under during planned period. There are two approaches for deciding the size of investment

i.                Recourse approach

ii.              Requirement approach

i.                Resource approach:

The resources approaches may be:

a.     Domestic or internal

1.               Can be private saving

2.              Can be public saving

                  b.   International or external.

The domestic resources are the internal resources depending upon private and public saving.

The international resources depend upon:

1.               Loans and grants given the world-bands. USAID, or the loans provided by developed countries to the developing and under-developing countries.

2.              direct investment: the investment done by the foreign companies. E.g. pharmaceutical companies, fertilizer companies. Etc.

3.              Export/Import:- the balance b/w export and import should be positive which is difficult except for oil producing countries and developed countries.

        Requirement approach:

          It depends upon:

1.               Capital output ration: Output ratio should be more e.g. 3:1,i.e 1 units of investment to generate 3 units of income.

2.              Population growth rate: It is the difference b/w birth and death ratio. 

3.         Per capita income: The population growth will determine that at what rate the per capita income should be increased. Increase in per capita depends upon the investment. If per capita income is 2% than of additional income in GNP is required for maintaining the present level of GNP.

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