Economic planning is a strategic process employed by governments or organizations to coordinate and manage the allocation of resources and the development of an economy. It involves setting specific goals and objectives, formulating policies and strategies, and making decisions to achieve desired economic outcomes.
Here are some key points about economic planning:
- Objectives: Economic planning aims to achieve various economic and social objectives, such as economic growth, employment generation, poverty reduction, and improved living standards.
- Resource Allocation: Planning helps in the efficient allocation of resources, including labor, capital, and natural resources, to different sectors of the economy. This allocation is often guided by the principle of prioritizing key sectors for development.
- Long-Term Vision: Economic planning typically involves long-term thinking and vision. It sets out a roadmap for development over several years or even decades, allowing for stability and consistency in economic policies.
- Sectoral Planning: Governments often focus on specific sectors, such as agriculture, industry, or services, to boost their performance and contribution to the overall economy.
- Regulation and Control: Economic planning may involve regulatory measures and controls to ensure that the economy functions in a manner consistent with the plan’s objectives. This can include price controls, trade policies, and fiscal measures.
- Infrastructure Development: Planning often emphasizes infrastructure development, including transportation, communication, and energy, as these are critical for economic growth and development.
- Public and Private Sectors: Economic planning can involve both the public and private sectors, with government policies and incentives designed to promote private investment and entrepreneurship.
- Adaptability: Economic plans must be adaptable to changing economic conditions and external factors. Flexibility in planning is essential to respond to unforeseen circumstances.
- Global Perspective: In today’s interconnected world, economic planning often considers international trade, investment, and global economic trends. Countries may align their plans with global economic realities to maximize their economic benefits.
- Critiques: Economic planning is not without its critics. Some argue that it can stifle innovation, lead to inefficiencies, and result in bureaucratic red tape. Balancing centralized planning with market forces is a key challenge for planners.
Economic planning can take various forms, from centralized command economies to mixed economies that blend market-driven elements with government intervention. The specific approach to economic planning varies from one country or organization to another, depending on their unique goals, political ideologies, and economic circumstances.
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MCQs on economic planning and development
Q1. The Development, Monitoring and Evaluation Office,
which monitors the progress of long term policies in an attached office under :
(a) Prime Minister Office
(b) Ministry of Home Affairs
(c) Cabinet Secretariat
(d) NITI Aayog
Q2. Which of the following was called the Economic Cabinet of India by Ashok Chandra?
(a) Planning Commission
(b) Finance Commission
(c) Central Cabinet
(d) Administrative Reform Commission
Q3. National Development Council was constituted on :
(a) 16 August 1950
(b) 1 April 1951
(c) 6 August 1952
(d) 16 August 1952
Q4. In which year was the ‘Planning Commission’ set up in India?
Q5. The Planning Commission of India is :
(a) an autonomous body
(b) an advisory body
(c) a constitutional body
(d) a statutory body
Q6. NITI Aayog came into existence on :
(a) 1st January, 2014
(b) 1st June, 2014
(c) 1st January, 2015
(d) 1st June, 2015
Q7. Which one of the following is not correct about NITI Aayog?
(a) It was set up to replace the Planning Commision.
(b) It has a full-time Chairman.
(c) It was set up in January, 2015.
(d) It is based on the principle of Cooperative Federalism
Q8. In Government of India’s NITI Aayog, which is an economic policy-making think tank, what is the full form of NITI?
(a) National Internal Trade Information
(b) National Institution for Transforming India
(c) National Integrated Treaty Institute
(d) National Intellectual Training Institute
Q9. Which of the following is a Nodal Institution for implementation of Sustainable Development Goals in India?
(a) Planning Commission
(b) Disinvestment Commission
(c) NITI Aayog
(d) Finance Commission
Q10. Who was the first Vice-Chairman of the NITI Aayog?
(a) Arvind Panagariya
(b) Raghuram Rajan
(c) Chandrashekhara Subramanyam
(d) Rajiv Kumar
Q11. According to NITI Aayog, which of the following States is at the top in the India Innovation Index 2023?
(a) Tamil Nadu
Q12. The ex-officio chairman of Planning Commission is :
(a) President of India
(b) Prime Minister of India
(c) Finance Minister of India
(d) Finance Secretary of India
Q13. Who is the present Vice-Chairman of the NITI Aayog?
(a) Amitabh Kant
(b) Parameswaran Iyer
(c) Suman Bery
(d) None of them
Q14. ‘National Planning Committee’ was set up by :
(a) Jawaharlala Nehru
(b) A. Dalal
(c) Subhash Chandra Bose
(d) Lal Bahadur Shastri
Q15. Who among the following formulated the ‘Gandhian Plan’?
(a) Mahatma Gandhi
(b) Sriman Narayan Agarwal
(c) M.N. Roy
Q16. Who amongst the following drafted the ‘Sarvodaya Plan’?
(a) M.N. Roy
(b) Jai Prakash Narayan
(c) Morarji Desai
(d) Shriman Narayan Agarwal
Q17. In which one of the following years ‘Rolling Plan’ was in operation in India ?
Q18. The major objective of Indian Five Year Plans is :
(a) Equal distribution of wealth or income (b) Self-reliance and reduction of dependence on foreign aid
(c) Development of backward class
(d) Increasing role of Private sector
Q19. The period of the 12th Five-Year Plan is :
Q20. What is economic planning?
a) A market-based system
b) A government-led approach
c) A free trade policy
d) A socialist ideology
Q21. Which of the following is not a primary objective of economic planning?
a) Economic growth
b) Income distribution
c) Environmental conservation
d) Price stability
Q22. What is the primary aim of a command economy?
a) Profit maximization
b) Economic freedom
c) Centralized government control
d) Consumer choice
Q23. What is the primary role of a central planning authority in a command economy?
a) Setting prices
b) Encouraging competition
c) Promoting entrepreneurship
d) Protecting consumer interests
Q24. Which economic planning concept involves government intervention to correct market failures?
b) Market socialism
Q25. Which of the following is not a component of a typical macroeconomic plan?
a) Fiscal policy
b) Monetary policy
c) Trade policy
d) Social policy
Q26. What is the key indicator of a planned economy?
a) High income inequality
b) Private ownership of production
c) Centralized economic decision-making
d) Government non-intervention
Q27. In economic planning, what is “inflation”?
a) A rise in the quality of goods and services
b) A decrease in the money supply
c) An increase in the general price level
d) A decrease in the unemployment rate
Q28. What is the purpose of a development plan?
a) To reduce government spending
b) To increase inflation
c) To achieve economic and social objectives
d) To promote income inequality
Q29. InWhat is the primary goal of a market-oriented economic plan?
a) Income redistribution
b) Maximizing government control
c) Allocating resources through supply and demand
d) Promoting socialism
Q30. Which of the following is not a tool of fiscal policy?
b) Government spending
c) Interest rates
d) Budget deficit
Q31. What is a centrally planned economy often referred to as?
c) Mixed economy
d) Laissez-faire economy
Q32. What is the main tool used in monetary policy to control the money supply?
a) Government spending
b) Interest rates
d) Trade agreements
Q33. In a mixed economy, who owns and controls most industries?
b) Private individuals or corporations
c) Labour unions
d) Foreign investors
Q34. Which type of economic planning often involves a black market and informal economy?
a) Command economy
b) Market-oriented planning
c) Laissez-faire capitalism
d) Import substitution
Q35. What is the primary role of the World Trade Organization (WTO)?
a) Regulating global financial markets
b) Promoting international diplomacy
c) Facilitating international trade
d) Funding development projects
Q36. Which of the following is an example of a regressive tax?
a) Progressive income tax
b) Sales tax
c) Corporate income tax
d) Property tax
Q37. What is “foreign direct investment” (FDI) in the context of economic planning?
a) Government spending on foreign projects
b) Loans provided to foreign countries
c) Investment in foreign businesses by a multinational corporation
d) A trade deficit with a foreign nation
Q38. Which organization was established to provide financial assistance to developing countries?
a) International Monetary Fund (IMF)
b) World Health Organization (WHO)
c) United Nations (UN)
d) European Union (EU)
Q39. What does “BRIC” refer to in the context of economic planning?
a) A type of building material
b) An alliance of Asian countries
c) An emerging markets group consisting of Brazil, Russia, India, and China
d) A global trade organization
Q40. What is the primary function of a central bank in economic planning?
a) Regulating trade policies
b) Controlling inflation and managing the money supply
c) Administering social programs
d) Promoting international diplomacy
Q41. What is the term for the total value of a country’s exports minus the total value of its imports?
a) Trade surplus
b) National debt
c) Fiscal deficit
d) Balance of trade
Q42. Which economic term refers to the study of how individuals, businesses, and governments make choices about allocating resources?
c) Monetary economics
d) Fiscal economics
What is Economic Planning?
Economic planning is the process of setting specific goals and strategies to achieve economic growth, stability, and development in a country or organization. It involves making decisions about resource allocation, investment, and policy to promote a sustainable and prosperous economy.
Why is Economic Planning Important?
Economic planning is essential because it helps a nation or organization allocate its resources effectively, reduce economic instability, and promote long-term growth. It enables governments and businesses to address various economic challenges, such as inflation, unemployment, and income inequality.
What are the Key Components of Economic Planning?
Economic planning typically involves various components, including:
Setting Goals: Defining economic objectives like GDP growth, employment levels, and inflation targets.
Resource Allocation: Deciding how to allocate resources such as labor, capital, and natural resources.
Policy Formulation: Developing fiscal, monetary, and industrial policies to achieve economic goals.
Monitoring and Evaluation: Continuously assessing progress and making adjustments as needed.
Infrastructure Development: Investing in infrastructure and public services to support economic growth.
What are the Different Types of Economic Planning?
There are various models of economic planning, including:
Centralized Planning: A government or central authority makes most economic decisions.
Market-Oriented Planning: Economic planning that relies on market forces, with limited government intervention.
Indicative Planning: Governments provide guidelines and incentives for private sector behavior.
Decentralized Planning: Local or regional authorities have substantial control over economic planning.
What Are the Challenges of Economic Planning?
Economic planning can face several challenges, including:
Information Gaps: Insufficient data and forecasting uncertainties can hinder planning.
Political Interference: Political agendas can sometimes influence planning decisions.
Global Economic Factors: International factors like trade and financial markets can affect a nation’s economic plan.
Adaptability: Economic plans must be adaptable to changing circumstances and evolving economic conditions.