Question

Write your question here (Keep it simple and clear to get the best answer)write a critical note on the various debates on models of development planning

Answer 1

Criticisms of Indian planning
Despite these achievements, however, in recent years Indian planning has come under attack from a number of quarters, both within and outside the country. Countries which for long had centrally-planned economies have abandoned planning, at least overtly. It sometimes comes as a surprise to people abroad that India continues to preserve planning as a central pillar of its development strategy despite having had a vibrant market economy for many years now.

Within the country, dissatisfaction with planning emanates from two main directions. First, there is a view that planning is synonymous with statism, and is symptomatic of a desire of the government to intervene excessively in economic matters. Second, the fact that a number of developing countries have performed better than India by following different growth strategies is laid at the door of planning. Much of the criticism is misinformed, since it represents not a criticism of planning as such, but either of its ideological underpinning or of the success it has achieved in India.

In so far as the first criticism is concerned, it relates to a particular form of planning – namely, investment planning, whereby the government determines the quantum of investment that will go into any sector or even industry. The argument appears to be that central planners are less competent to take and direct investment decisions than entrepreneurs operating under the discipline of market forces. While this view is certainly true at the present stage of development of the Indian economy, there are two points that need to be made to place the issue in perspective.

First, it needs to be realised that investment planning in its pristine sense has not existed in India at least for the last thirty years, when the dilution and eventual dismantling of the industrial licensing regime was initiated.2 Second, investment planning in the sense of working out the investment requirements of different sectors of the economy in order to ensure inter-sectoral consistency continues to be valid, and will be so until such time as India becomes a capital-surplus country and the importance of public investment diminishes significantly. Interestingly enough the Indian corporate sector appears to share this view. The experience at the Planning Commission indicates that the single largest user of the Plan projections is in fact the private corporate sector, which recognises the value of sectoral forecasts made in a consistent, economy-wide framework for its own investment decisions.

The second stream of criticism is even less valid, at least as far as the manner in which it is usually couched. The first major error that is commonly made is to base the criticism on inter-country comparisons and not on the basis of counterfactual simulations. The simple fact is that development experiences will differ across countries for a host of reasons, of which the approach taken towards development strategy is only one. Political, social and cultural factors are just as important, and it is difficult to make allowances for these in a cross-country context. The second error lies in assuming that the countries with which India is being compared do not have planning as well. This is generally simply not correct. Almost every country which has performed well in recent years has strong planning systems, perhaps even stronger and more empowered than ours.