What is Economic Planning?

Ans: Econonomic planning is the activity of deciding the best way of

using money, labour, and other resources in order to make a business
or industry successful. In other words, Economic Planning refers to a
mechanism set by a government to make decisions to improve the
economy of the country.

Economic planning is a resource allocation mechanism based on a

computational procedure for solving a constrained maximization
problem with an iterative process for obtaining its solution. Planning is
a mechanism for the allocation of resources between and within
organizations contrasted with the market mechanism. As an allocation
mechanism for socialism, economic planning replaces factor markets
with a procedure for direct allocations of resources within an
interconnected group of socially owned organizations which together
comprise the productive apparatus of the economy.

Or,

Economic planning is - “the making of major economic

decisions - what and how much is to be produced and to whom
it is to be allocated by the conscious decision a determinate
authority, on the basis of a comprehensive survey of the
economic system as a whole”.

What are the importance of Economic Planning?

Ans: Economic Planning is important as it: provides a guide for

action, improves resource utilization, gives motivation. Moreover, it
sets out performance standards and allows flexibility to find
alternatives ways if needed.
Resources of all types – Capital, natural and human- are very
limited. Planning provides a basis of rational and considered choice
for securing the optimum combination and utilization of resources.

Economic planning helps to identify those deficiencies in the

economy and the social structure which need the maximum
attention from the standpoint of economic growth.

A plan is a scheme of investment and it requires mobilisation of

necessary financial resources. Planning helps to indentify critical
issues of development and provides a quantitative dimension. It
leads to a higher degree of capital formation which otherwise may
not be attainable.

Planning facilitates institutional changes by drawing attention to the

social requirements of growth. The very process of planning and the
implementation of plans enlarge the scope of the public
participation and cooperation.

Central planning can extract a higher investment now to promote a

more rapid growth rate in future. It helps to ensure that potential
riders (people who do not want to make sacrifice on the fear that
others may not do so) play their part.

With improvement in the techniques of planning and availability of

more precise statistical data, inter-relationship within the national
economy can be seen more clearly. It becomes possible to judge the
impact of different policies and measures.

Economic plannimg for Bangladesh and its contribution