What is the Significance of planning in the context of liberalization



The role of planning in managing modern market economy is quite different from what it was three decades ago when the public sector was seen as having an expanding role and government sector pervasive whereas under the present circumstances, the country expects and encourages much freer operation of market forces and the Government is withdrawing from large part of the economy.

It is believed that free markets are conducive to economic efficiency and, therefore, higher economic growth.

But there is a misconception that the Government has no role to play in the change economic scenario. It is true that the role of the Government is radically different from what it was in the past.

The following points give us a clear idea about the role of planning in the context of liberalisation, privatisation and globalisation of the Indian Economy.

1. The Government must withdraw from areas, which are best-managed by the private sector but it must strengthen its position in certain areas where the private sector cannot be expected to play a role.

2. A whole range of social sector, especially health and education, are clearly areas where the Gov­ernment must play a much larger role than it has in the past, if it has to meet the huge gaps that the country faces at present.

3. In addition, the entire area of rural economic infrastructure is one that cannot be left entirely or mainly to the private sector. Programmes of soil and moisture conversation, rural land develop­ment, provision of safe drinking water and sanitation are areas where the state will have a role in the foreseeable future.

4. In the area of economic infrastructure for the rest of the economy, what is needed is a partnership. In the past, economic infrastructure such as railways, ports, national roads and power were all provided by the Public Sector. Now, these services have been opened up to the private sector to the extent that the private sector can be expected to come in and this varies from sector to sector.

5. However, in the foreseeable future, in the development of the national road network, the bulk of road development will have to be in the public sector, although a start in this area has already been made.

6. For all the above reasons, public investment both at the Centre and in the States will continue to have a major role in the development of the country and the prioritisation of this investment will form part of the planning process.

7. Again, in the present context of federal polity, some subjects are allotted to the central government, others are left to be managed by the Sates, and in some both the Centre and State governments have a concurrent jurisdiction added to that some issues are to be tackled by the elected Panchayati raj institutions at the village level and by the urban bodies.

The most vital function of planning in such a federal system is to evolve a shared vision of or a shared commitment to the national objectives in the government at all levels, but also among all other economic agents.

8. No development strategy can be successful unless each component of the economy works towards a common purpose with the full realisation of the role that it has to play within an overall structure of responsibilities.

9. Planning Commission is best equipped to evolve a long-term economic strategy for the development of the country.

10. In spite of the liberalisation of the economy, there are some functions which can be performed by the Planning Commission alone. For instance, it is required to address the national objectives of poverty alleviation, population control, employment generation and balanced regional development in a holistic manner. Leaving these issues to the sectoral ministries runs the danger of the inter linkages and synergies being overlooked.

11. Another area where Planning Commission is relevant is in co-coordinating the economic activities of the central and state governments and among the central ministries.

12. Coherent policy-making requires that some agency ensures that the different and autonomous tiers do not work at cross-purposes.

13. In addition, the creation of a partnership in the public and private sector in other infrastructure sectors requires a supportive regulatory framework. Here, policy planning rather than the old fashioned material planning plays a crucial role.


From the above it is clear that in not only developing countries like India, but of the developed countries as well, planning forms a vital component in deciding the future of the country.

Planning will also involve a greater realisation of the interdependence that already exists between different countries of the world, and short-term profit motives will have to give way to building long-term relationships on the basis of mutual benefit.

A candid review of the planning experience of four and a half decades reveals the broad limitations of the 'top down' or 'trickle down' approaches to development.

To improve the effectiveness of the various programmes, which help the poorest of the poor, the institution of plan administration must be re-oriented to capture and internalise the aspirations of the common man and suitably modify them keeping in view the resources availability and the state of technology.

The 73rd and 74th Constitutional Amendments is expected to pave the way for flourishing of the PRIs and Ninth Plan hastened the process of giving 'power to the people'.