PRABHAT PATNAIK" Macro-economic Policy and Planning Economic Transformation** The reference to planning* in the title of this paper may appear to many as a mere ideological hang-over. But the case for 'planning', in the sense of a co-ordinated set of policies to realise, at least in some key sectors, certain magnitudes of investment and output-growth, remains as strong today for developing countries wishing to achieve economic and social transformation, as it ever was. There are at least three reasons for this. First, the pace of investment in a spontaneously-operating capitalist economy depends upon the so-called 'state of business confidence'. The state of business confidence may be such that it leaves the economy demand-constrained for long-stretches of time; what is more, even when the macroeconomy is not demand-constrained, the mix between consumption and investment in aggregate demand may be too much in favour of consumption relative to social requirements. Deliberate intervention by the State is needed not only to overcome demand-constraints, as the Keynesians argue, but, more importantly, to alter the composition of aggregate demand, and to do so in a manner which is socially equitable. The second reason relates to the need for sectoral balance. While the previous argument remains valid even in a one-good world, an additional problem arises the moment we recognise the real life multiplicity of commodities. For a spontaneously-operating capitalist economy, the pattern of supplies adjusts to the pattern of demand through episodes of profit-inflation located in particular sectors. These provide the signals for supply-adjustments to occur over a period of time. In short, the episodes of sectoral profit-inflation are more or less protracted, less protracted, depending upon the speed of adjustment of supplies. But such episodes of profit inflation, if they are severe, protracted and relate to certain essential sectors, are capable of causing extreme social hardships and devastation. The most notable case here relates of Centre for Economic Studies an^d Planning, Jawaharlal Nehru University New Delhi. This paper was originally presented at the ANC Conference on Macro-economic Strategy in Johannesburg, South Africa, in January 1992. Social Scientist, Vol. 20, Nos, 1-2, January-February 1992