DEVELOPMENT PLANNING AND PROJECT ANALYSIS I

CHAPTER ONE: INTRODUCTION

1.1. The evolution of Development thinking

The evolution of development thinking can be summarized in to three different periods:

The Early Post War Consensus

The Washington Consensus

The Oscillating Search for Silver Bullet

1.1.1. The Early Post War consensus

This period covers immediately after cease of World War II up to the end of 1960's and
beginning of 1970's. This is an interesting period for the developing world because it gets
attention by academicians how growth and development could be achieved in these countries.
That is why in the 1950's and 1960's, the previously neglected sub-fields of Development
Economics were rediscovered. Available economic models seemed to offer only limited insights
into the practical problems facing the so-called Third World. The dominant one-sector macro
models of the day, from Keynesian to Harrod-Domar to Solow seemed to have relatively little
relevance for societies not primarily concerned with business cycles or steady state properties.

The period, for ease of understanding could be looked into five important sub- periods.

a) Dualism
It attracted due attention during the 1950s and 1960s. The components under dualism are:

 Sociological dualism: Boeke, 1953 is the major proponent. The central theme of
sociological dualism was differences between western and non-western objectives and
cultures are the major source for dualism.
 Technological dualism: Higgins, 1956 is the major proponent. Differences between
variable factor proportions in the traditional sector and fixed coefficients in modern
sector as major source for dualism.
  Physiocrats: viewing land as the source of all wealth, agricultural surplus supporting the
non-agricultural sector.
 Classical dualism: Ricardo and Lewis 1951 are major proponents. Surplus labor as
potential for growth when transferred from agriculture to non-agriculture. Lewis also
asserts dualism in labor markets (competitive wage in non agriculture versus
institutional wage in agriculture as basis for dualism).

b) Need for Balanced Growth (structuralism)

Rosenstein - Rodan, 1943 and Nurkse, 1953 and others emphasized the need for balanced
growth not only between agriculture and non agriculture but also with in each sector, so that
Say's law could come in to play and both shoes and socks should be produced to fill both the
demand and supply sides.

c) International Trade Scene

Prebisch, 1962 stated that the international trade scene painted in colors and was unfriendly for
development and demanded for equitable exchange.

d) Interventionist State
The current theoretical thinking indicates that there is strong inclination to turn to the
intervention state as a key instrument for development. The reasons that this was considered as
key instrument for development are first pre-colonial independent countries want to exercise
their own development agenda. At home the interventionist felt the need to create
infrastructure, and the institutions required to permit the functioning of a national entity.
Second industrialization was synonymous with development (2 nd industrialization revolution).
The motivation was to promote industry, with relatively less attention paid to what was viewed
as a stubbornly stagnant agriculture portrayed as a drag on the economy, and with peasants
seen as non-responsive to prices and profit opportunities.

A logical accompaniment of these views were PLANNING MODELS, focusing on the flow of
resources, domestically financed investment supplemented by foreign capital and paying
relatively little attention to changes in the behavior of the system or the relevance of technology.
The planning models used were:

 Planning for resources: such as Simple Harrod - Domar and Mahalonobis models. These
models are all silent on price, and foreign exchange rate flexibility. The predominant
view of policy makers at that time was that growth and efficiency should take priority
and the issues of equity, poverty alleviation, etc should be taken care of at a latter date.
 Multi - sector production function with multiple inputs and variable (Input-Output
models, Social Accounting Matrix). The real focus of planning shifted from resources
focus to devising strategies for policy change to accommodate the changing requirements
of transition.

e) Technology in generating growth

Solow, 1957 and Kuznets, 1955 contribute to emphasize the importance of technology in
generating growth. This provided a new point of departure for neo-classical growth theory, not
only replacing Harrod-Domar with a substitutable production function, but also enthroning
exogenous technology change. They introduced critical elements like Research & Development
(R and D), patents and other forms of scientific endeavors leading to new growth theory.

It was, however, Kuznets 1971, though mainly concerned with describing modern growth
rather than analyzing the transition process in getting there, which provided another essential
ingredient focused precisely on the developing world at the end of the post-war consensus era.
Kuznets was interested in why some developing countries were successful and others not and
placed major emphasis on the sources of structural change over time as between agriculture,
industry and services. He viewed policy as either basically accommodative or obstructive to the
play of underlying economic forces and did not view it as an exogenous variable.

1.1.2. The Washington Consensus

It is undoubtedly unfair to attribute the realization that policy change is the key ingredient of
successful development to the international financial institutions. It rather would give more
credit for the realization that prices matter more and that macroeconomic stability matters less.
The major contributors of the idea are: Little, Scitovsky, and Scott 1970, Bhagwati 1978, Krueger
1978, Cohen and Ranis, 1971, among others, who insisted that a re-structuring of the rails of
development was needed.

The main ingredients of the consensus are:

 Privatization and unified and competitive exchange rates

 Simultaneous liberalization of financial markets (domestic and international)
 Relative openness to Foreign Direct Investment (FDI) and gradual deregulation of
control systems
 Emphasize on R and D
 Changes at micro level: labor market productivity, legal, financial and other institutional
reforms
 Program lending changes in to structural adjustment lending. Both program and
structural adjustment lending were subject to debates ranging from cost effectiveness of
the resources spent to all the way the conditionality lists imposed on internal affairs of
the recipient country.

1.1.3. The Oscillating Search for a Silver Bullet

Viewing per capita income growth as the key objective has been questioned for sometimes.
Serious mainstream attention has been given to the distribution of income, to the extent to
which private income poverty is reduced and to the extent to which public income poverty
(the distribution of public goods) is being addressed. The public income poverty can be seen
through various human development dimensions like infant mortality, life expectancy, literacy
as fundamental objectives of development.

The basic efficiency - equity tradeoffs led to redistribution with growth approach of
development. The controversial relationship between growth and income poverty alleviation is
that growth is a necessary but not sufficient condition for poverty reduction.

Theoretical Revisionism

Recently with the advancement in theoretical thinking and problems faced in global relations,
there arises a need to revise some theories. These are:
  New Trade Theory: the challenge to openness (globalization) and favoring import
substitution (infants) leads to the two-way relationship between growth and human
development.
 Recent emphasize of development economists are on: micro foundations of development
issues (women household decision making; poor performance of land, labor and credit
markets) and micro-credit organizations and NGO's in developing countries.

Best Guesses as to the Way Forward

 Avoid dealing with large number and going towards a set of small number comparative
historical studies encompassing typologically ''neighboring'' countries.
 Need to pursue on the two-way relationship between growth and human development.
 Closer look on the pros and cons of decentralization and its relation to democratization
and decision making by the broader body politics.

1.2. Historical Background of Economic Planning

The idea of planning has a long history and goes back to the time of Pluto [the first person who
talked about organized planning]. It was later developed, shaped and molded by eminent
thinkers and writers both in the western and eastern camp. However, the idea of economic
planning in its modern form is comparatively new. It is the 20th century phenomena.

Ideologically, the evolution is from three perspectives:

1. Planning in eastern Europe (socialist perspective)

2. Planning in western Europe (capitalist perspective)
3. Planning in underdeveloped countries (mixed economy perspective)

1.2.1. Planning in Eastern Europe

During the 19th century, intellectual theorists, thinkers and writers in the Eastern Europe
became fed up with the inquiry and contradictions of pure capitalism. Therefore, they
developed the idea of state intervention to set matters right and to prevent inequalities resulting
from capitalism (free economy) a solution to the fallacy of laisser-faire. But it was only state
intervention that was advocated. There was no mention of economic planning and how to
interrelate was ambiguous (although they realized that laisser-faire was not working). In 1928
the Soviet Union gave the idea of economic planning a real shape when it formulated its first
five year plan.

The main objective of the socialist (Soviet) plan was to achieve the rapid transformation of a
backward agriculture sector (traditional sector) into a modern industrial sector.

1.2.2. Planning in Western Europe

There could be several factors that necessitate planning in Western Europe, among others wars,
great depression of 1930th, expansion of markets, and specialization. In Western economics, a
series of the above historical development led to the coordination of economic policies, i.e.,
planning. These are:

a) The development of science and technology not only made material progress possible,
but also they made planning possible as well improve computation facility; advances in
management theory (organization coordination). The intervening depression reminded
the state of the tragedy incompleteness of economic theory and public policy.
b) In the 1930’s, the capitalist world was in the midst of the biggest depression in the world
history. Capitalism failed an utter collapse and its inherent contradiction came up to the
surface. Economic growth collapsed and acute misery poverty well experienced by
people. Therefore, economist and politician favored economic planning as a remedy for
these and other economic ills. People’s mind now turned to economic planning as
panacea for their economic ills while Keynes writings also in a way strengthen the belief
in the efficacy and economic planning in capitalist countries. Meanwhile there was an
attempt to plan economic life in Nazi German and Fascist Italy during the time (thirties).
Note: - The objective of the economic planning in the West was basically different from
that of the Soviet Union. The purpose of planning in Nazi Germany was primarily to
build up the war potential rather than improving the living standard of the people.

c) The outbreak of World War I and II necessitates the proper and efficient planning of
economic resources for successful prosecution of the war. [For coordinated management
of scarce resources]
d) In the post war period, the war devastated countries of Europe were compelled to resort
to economic planning to rehabilitate themselves owing to:-
  As a condition for receiving assistance under the Marshal plan, the USA insisted
upon these countries to formulate their rehabilitation plan covering almost every
sector of the economy.
 The USA itself has recognized the significance of economic planning when it
adopts an economic program called the “new deal” to come out of the suffering
from great depression in thirties.
e) The growth of markets and increased specialization led to increased interdependence
among economic activities and to greater economic externalities, which lead to adoption
of economic planning. There is a need to intervene public agencies to rectify the negative
externalities.
f) The development of democracy also lead to the adoption of planning in order to rectify
social inequalities people could vote for those who experience an interventionist
approach.

1.2.3. Planning in Underdeveloped Countries

Economic planning was considered as important panacea (remedy) for underdeveloped
countries in their desire for industrialization. They want to achieve rapid growth in short
period of time. Economic planning, therefore, was considered as a tool to achieve rapid
economic development.
However, the development (evolution) of planning took a different course (path) than the rich
countries due to the following reasons:
i. In Less Developing Countries, planning was considered as an ideology rather than a
means because in these countries planning was considered as a desire (expression) of
many things, such as: Desire of self control, Desire (expression) of independence ,
Expression of self-determination, then planning as a political and cultural goal.
ii. New leaders (elites) emerged when they got independence with new vision (ideas).
This brings new decision making capacity, which is to mean colonial administrators
were gone and these new leaders have to plan because it was considered as a potential
tool (instrument) to survive and prosperity. However, the then planning was not as a
result of popular participation (bottom up planning). it was up down planning to
express the need of the leaders who control the political structure - they dictate the plan.
Planning here was not as a consequent of industrialization, which is the inverse of the
Western, developed countries.

In general, after its introduction in the USSR in 1929 the concept of planning remained
unconsidered for about two decades, till after the end of WWII. Socialist countries started
preparing and implementing their plans after 1945 whereas non socialist countries planning
took birth in the 1950’s. Not only is planning in practice very new, it has during its brief
existence, undergone several changes. These includes considerable diversification of methods
of planning, even in socialist countries, according to the specific historical conditions of each
country; greater decentralization, particularly in the sphere of management of industry ,large
use of economic incentives and decreasing use of administrative instruments for the
implementation of plans etc.

1.3. Projection ,Planning and Forecasting

The planner should have an interest or a desire on the subject matter he/she is going to
accomplish before “when and how” to perform it. A desire to undertake a work is called
projection. i.e. Projection is a precondition to planning and forecasting.

Planning at any time is concerned with the future, when the goal laid down in a plan and the
means by which these are to be achieved depends on. Forcasting involving the use of statistical
laws and probability calculation also concerns the future and provides answer to questions like
“when?” and “how accurately?” Planning is not forecasting although it makes use of the
techniques of forecasting.

Forecasting regards economic activity as a spontaneous activity ,which it just trace out and to
which we are subjected whereas planning influences the course of events and under it man,
instead of being subjected to economic events, dictates to the economy. As such planning also
limits the relevance of forecasting by controlling the events. It follows that with the increase the
degree of perfection in planning, the field of forecasting will be corresponding reduced.

However, forecasting is important in two respects:

i. It shows the likely course of future development
ii. It enables concerned people to take necessary steps for meeting the developing
situations

Despite the difference, it is nevertheless true that planning implies a preliminary operation of
forecasting. No planning is possible with out planners at first being aware of the future course
of events.
 In the situation where future economic developments are unavoidable each plan constitutes a
blend of elements of forecasting as to what is what is objectively unavoidable with planning of
what is desired. Forecasting gets in the preparation of planning in two ways in the preparation
of plans, and in knowing about those developments which cannot be influenced. As stated by
Maurice Dobb <<any plan must in some form by synthesis of forecast and direction>>.

1.4. Definitions of Economic Planning

There is no agreement among economists with regard to the meaning of the term economic
planning. The term has been used very loosely in economic literature. It is often confused with
communism, socialism or economic development. Any type of state intervention in economic
affairs has also been treated as planning. But the state can intervene even without making any
plan. What then is planning?

Planning is a technique, a means to an end being the realization of certain pre-determined

and well-defined aims and objectives laid down by a central planning authority. The end
may be to achieve economic, social, political or military objectives. The idea underlying
planning is a conscious and deliberate use of the resources of the community with a view to
achieving certain targets of production. The State, through a planning authority, takes the
responsibility of planning. It represents a complete break from the policy of laissez-faire.

The two main constituents of the concept of planning are:

 A system of ends to be pursued, and

 Knowledge as to the available resources and their optimum allocations.
Thus, planning is a technique for achieving certain self-defined and pre-determined goals laid
down by a central planning authority.
Professor Lewis (W. Arthur Lewis) in "The principles of Economic Planning" has referred to six
different senses in which the term planning is used in economic literature. These are;
 Town and country planning – involving geographical zoning of factories, residential
buildings.
 programming of public expenditure for different time period
 Planning of production( how firms use different factors of production)
  Planning which involves setting of targets by government for private or public
enterprises
 Planning which incorporate target setting for the whole economy.
 Planning which the government uses to try to enforce up on private enterprises.

There is an enormous literature in which it refers only to the geographical zoning of factors,
residential buildings, cinemas and the like. Sometimes this is called town and country planning
and sometimes just planning.

Planning means only deciding what money the government will spend in the future, if it has the
money to spend.

A planned economy is one in which each production unit (or firm) uses only the resources of
men, materials and equipment allocated to it by quota and disposes of its product exclusively to
persons or firms indicated to it by central order.

Planning' sometimes means any setting of production targets by the government, whether for
private or public enterprise. Most governments practice this type of planning if only
sporadically, and if only for one or two industries or services to which they attach special
importance.

Here targets are set for the economy as a whole, purporting to allocate all the country's labor,
foreign exchange raw materials and other resources between the various branches of the
economy.

The word 'planning' is sometimes used to describe the means which the government uses to try
to en force upon private enterprise the targets which have been previously determined.

But Ferdynand Zweig maintains that planning is planning of the economy, not within the
economy. It is not a mere planning of towns, public works or separate section of the national
economy, but of the economy as a whole. Thus planning does not mean piecemeal planning but
overall planning of the economy.

Some of the definitions of economic planning given by other academicians are:

Professor Robbins defines economic planning as "collective control or super session of private
activities of production and exchange."
To Hayek, planning means, "the direction of productive activity by a central authority."

According to Dr. Dalton, "Economic planning in the widest sense is the deliberate direction by
persons in charge of large resources of economic activity towards chosen ends."

Lewis Lord win defined economic planning, "as a scheme. of economic organization in which
individual and separate plants, enterprises, and industries are treated as coordinate units of one
single system for the purpose of utilizing available resources to achieve the maximum
satisfaction of the people's needs within a given time.

In the words of Zweig, "Economic planning consists in the extension of the functions of public
authorities to organization and utilization, of economic resources. Planning implies and leads
to" centralization of the national economy.

One of the most popular definitions is by Dickinson who defines planning as the making of
major economic decisions on:
 what and how much is to be produced,
 How, when and where it is to be produced, and
 to whom it is to be allocated,
Even though there is no unanimity of opinion on the subject, yet economic planning as
understood by the majority of economists implies deliberate control and direction of the
economy by a central authority for the purpose of achieving definite targets and objectives
within a specified period of time.

As a working definition Planning is a technique or a means to achieve an end. End refers to certain
predetermined target (well defined objective). End might be achieving:
 Economic objectives,
 social objectives or military objectives or both

The main point is not to have plan or not to have plan but what kind of plan do we need to
achieve the objectives. Intervention of state in all economic activities is inevitable, i.e.;
government do intervene in an economy in one way or another. But what matters is the degree,
type and nature of intervention.
It is difficult to have a single universal accepted definition of economic planning. There are
various factors which obstructed for the clear and precise concept of economic planning. The
concept of economic planning can be seen from two angles. These include institutional related
meaning of economic planning and development related meaning of economic planning. The
former concept is related with the ownership pattern of resources. In regard to this concept for
socialist countries economic planning in the context of private ownership is contradictory and like
hot-ice. For them it is precisely for doing things differently from market mechanism that planning
is needed. On the other hand non-socialist economies planning is compatible with any
institutional arrangement (privatization, liberal competitive market system etc).

Another angle of conceptualizing economic planning is the different level of development of

countries. Various countries adopting planning are at different level of development and have
different patterns of development. The differences have affected decisively the point of
concentration of economic planning. In case of developing countries at low levels, infrastructural
investment gets to priority. At the higher level ,the planning horizon widens with choice to be
made in such term as a heavy Vs light industries, investment on consumer goods or capital goods
etc. for developed economies increasing further consumption level, advanced in the technology
front ,and expand R&D are the crucial consideration of their economic planning.
Beside to the above arguments, different authors described economic planning in various ways.
Among these:
W. Arthur Lewis in “The Principles of Economic Planning” mentions at least six ways in which
economic planning could be interpreted. These are;
 Town and country planning – involving geographical zoning of factories, residential
buildings.
 programming of public expenditure for different time period
 Planning of production( how firms use different factors of production)
 Planning which involves setting of targets by government for private or public
enterprises
 Planning which incorporate target setting for the whole economy.
 Planning which the government uses to try to enforce up on private enterprises.

Thomas Wilson described growth related meaning of economic planning. According to the author
“planning is a number of consistent and related measures designed to create an environment
more favorable to growth” or “planning involves the preparation of official programmes in order
to control the production of every industrial enterprises”.

Everett E. Hagen mentioned institutional related meaning of economic planning. Planning for
economies which resources owned by the government is understood to refer to “centralized
control of the economy” where as for market economies or mixed economies, planning implies
“the government has organized its decision making process so as to take account of all the
economies effects of each of its acts to achieved as rapid economic growth as is consistent with
other national goals.

1.4. The Need for Economic Planning

Planning has been introduced in different countries for different reasons. In socialist countries,
where revolutions preceded and public ownership of resources followed, planning becomes an
institutional need of the system. In non-socialist countries, with private ownership, several
factors have initiated the use of planning. On the other hand colonized countries used need
planning to be out of the colonial system and to adopt their own independent system. Despite
the large number of factors contributing for the need of planning, one can nevertheless broadly
list the major ones as follow.

I. Institutional Requirement

In a number of countries planning has been made use of to meet the institutional needs of their
people. The need of planning in socialist countries is to abolish private sectors /ownership/ in
the means of production and its replacement by public /state/ ownership and to influence the
character of ideology that has in spite people in this structural change of ownership. Another
aspect if related to capital accumulation A socialist society without private capitalist, needs
planning to determine the pace and pattern of capital formation as per its need.

The countries free from the colonial yoke has been found planning as the most effective
institutional/medium to achieve their common goals and to have a bright future, with rapid
industrialization and progressive growth rate. For non-socialist countries planning is important
to in the competitive economic system.

II. Economic considerations

Planning is necessary to meet the changes of modern economics, to help the entrepreneurs, to
undertake various developmental activities, taking in to consideration the constraint of
resources. Another change of significance is the integration of the various segment of the
economy. In this regard planning is essential to make the policies of the government rational
and effective and to narrow the big functional difference of macro and micro policies the
development of economy. Besides instability in the economy which is being created by
depression and unequal distribution of income and wealth could be checked by planning.
Rational use of resources could be made by the use of various planning techniques, such as cost
benefit analysis, input-output system and other qualification techniques.

III. Technology Considerations

Technologies of modern times involve so much expense that their fuller utilization requires that
they should be used in planned way. Due to a certain principal features of technology such as
indivisibility adjustability, product changes and mass production planning at a national scale is
important for the proper functioning of it. Modern technology is not variable or divisible to suit
just any scale of production. Thus, planning is crucial to reap the full benefits and to avoid any
wastage, to be certain about factors supplies as also the absence of any risk in respect of demand
for goods. Proper planning is important to modify, change or replace capital goods as the
technology changes as to provide fast depreciation of existing capital goods which is not related
to the technological fixed rate of wearing out over a fixed span of live capital goods. In addition
to these planning also necessary for the following issues first planning is important for new
products to take shape smoothes without upsetting existing productive capacity to much. It is
necessary to allow for time in the case of change, and security of future demand for existing
units. Secondly, modem technology is a mass production technology. Undertaking all allied
activities of production simultaneously could be beyond the capacity of the existing market
institution, even beyond the administrative set up of the country. Hence, planning at a national
or world wide scale through its perception of activities can provide for the multifarious
activities to ensure that the cost and the price of mass produced goods are kept minimum.

III. Pre requisite for Development

For many countries whether they are developed or less developed, development has been the
major reason for the adoption of planning. Planning is needed to organize surplus for
investment and mobilize resources through taxes, interest, price etc. In regard to the
development aspect planning is crucial for the following reasons.

A) Providing Investment Resources: provision of investment resource is the 1st and

foremost requirement of development. planning is essential for this as market is not an
adequate instrument for this purpose. As paul W.Rosntein Rodan has pointed out, “the
price-mechanism does not work well in respect of amount and composition of investment
when one is concerned with changes in fixed capital.” According to him, individual
investment decision may lead to non-optimum allocation of resources because it neglect
external economies and complementarities of industries, risk estimated by individuals is
exaggerated than that conforming an over all investment program and indivisibility of
capital requires bigger than small.
B) Organizing Resources: organizing resource for investment is an important factor for
development. Hence, planning ensure sufficiency of resources for productive investment
and collecting of these resources.
C) Balancing The Economy: The balance may be physical and monetary. Physical balance
concerns outputs and involve consistency in the production of various inputs while
monetary balance involves the elimination of inflationary and deflationary situation
using d/t monetary policy tools. planning is also needed for minimizing cost and
maximizing profit and for making product of profit maximizing unit by adopting various
policies.

V. Need of Planning for Developing Countries

Due to special features of less developing countries, planning also has a special importance for
these countries on top of the above benefits. These include:
1. Removing antigrowth milieu - There are different economic, social and political factors
that hinder the economic growth of developing countries. All these stands in the way of
development can be removed by establishing now industries and expanding the old ones,
creating a smooth environment for foreign direct investment and sealing up the social
awareness.
2. Over-Coming Smallness - the smallness may be created due to low incomes so that low
demand for goods and sowing, small geographical size, high population growth or
paucity of natural resources. These problems can be solved by proper planning strategies.
3. Development of infrastructure – infrastructure on telecom ,highway ,urbanization,
electrification etc-
4. Public enthusiasm - planning in lesser developed countries find fertile growing in the
mind of the people. The one most important thing that provides a fertile ground for
planning is the newly generated enthusiasm of the people for it. They see in plans their
dream of high standard of living. Such a wish produces a dynamic force and an
improvement in their working culture. They even over look errors and incompetence,
tolerance mistakes and willingly accept hardships for the sake of bright future.
5. Large opportunities - The planner see in the present situation of LDCs’ great new
possibilities of growth. The knowledge about the resources and technologies practices in
advanced countries is of considerable significance in exploring and tapping their own
resources. They are opportunities for doing big things like creation of new factories, high
ways etc. These tires imagination of the leaders in the various field of life.
6. Semi-closed economies - Since LDCs’ are Characterized by: semi-closed economies, non
industrial and highly dominated by agricultural sector. Thus, any fluctuation in the
foreign economies couldn’t’ influence them significantly. For this semi closed and small
economies it is easier for the planner to fit them into plan frame.
7. Easier control and regulation- planned activities does not involve much demolition of
old activities as there is nothing to replace. Besides, development in these countries is
largely in the nature of gap filling. i.e setting of new industries, construction of dams
etc ,where nothing existed before. This makes the task of control regulation much easier.

1.5. Requisites for Successful Planning

i. Realistic goals- The formulation of objectives is the first major step in designing a good
plan while keeping in view the productive capacity of a country a plan. While
keeping in view the productive capacity of a country a plan should be such that it
should be inspire people to give the best for its implementation and completion. The
goal should be compatible with each other and consistent.
 ii. Appropriate policies and instruments- It is essential that adequate provision is made
for the fulfillment of planning through appropriate policies and instruments. Policies
outline the action and instruments are means to carry out the action.

iii. Adequate Information- Information on various aspects of an economy is of vital

importance both for the formation of plans and their implementation. Properly
collected and scientifically collected information is a key to the drawing of the true
pictures.

iv. Rational Institutions- An important requirement for successful planning is the presence
of such institutional arrangements that are conducive to the formation and execution
of plans. Institutions are of primary importance in the process of combining
resources of the potential of a country that are undertaken through human beings.
Among organizational agencies an important one is the institutions of public sectors.

v. Appropriate administrative and Technical Apparatus- This comprises the agencies, the
personnel and the producers and precedents for the effective operation of a plan,
these agencies need personnel which should be adequate in performing the various
services associated it planning

vi. Public-Cooperation- The active involvement of planners, administrators and public in

general to immense significant as it open up many possibilities and smoothness the
process of successful implementation of plans.

1.6. Cases For & Against Planning

Cases for planning- all arguments listed above

Cases against Planning

As a tool planning could not be a remedy for all economy, social and other ills. Broadly the
limitation could be on; concepts, coordination, action, follow up. The specific limitations
observed on planning are:
a. Planning heavily depends on reliable data. If there are no reliable data, the potential
benefits of planning will undermined.
 b. The problem of discontinuity. Planning models don’t deal with random shocks (natural
hazards, social changes, human intervention).plans work effective when social and
economic development changed continuously.
c. The problem of uncertainty (natural, market, war, international) which hinders the
success of the desired goal of the plan.
d. Inherently market is not imperfect. Market could be perfect by man mechanism. Thus,
no need of government intervention through planning.
e. Cost of planning administration and implementation in LDCs is too high.

1.7. Shortcomings of Planning

There are many difficult situations which arise for the proper formulation and implementation
of planning. These problems vary depending upon the historical situation of each country, and
the aim which they set before themselves. In general the following are the common problems
particularly for developing countries which have to be solved before any meaningful planning
is possible.
a) Unsuitable administration and lack of competent personnel- planning needs the
Varity of personnel such as administration, academicians, statisian, economists etc. to
realize the long term and short term objectives. However, the administrative and
personnel are largely incapable undertaking entrepreneurial activity, which is very
necessary at the initial stages of development in these countries.
b) Lacks of statistics - to have successful plan reliable and quality data or information are
very crucial. But in these countries there are no adequate statistic collecting agencies to
make comprehensive planning.
c) Unscientific attitudes & institution. – Investment & economic factors continues to be
governed by age old traditions and customs which obstruct the formulation and
implementation of scientific plans.