Social Scientist. v 3, no. 25 (Aug 1974) p. 46.


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NOTE

Informational Basis of Indian Planning

AT the very outset, it is necessary to recognize that, except for a brief period between 1955 and 1958, there has been no planning of economic activity in India, This is not saying that nothing whatsoever has been achieved on the economic front. It is, nevertheless, necessary to be very clear that some measure of economic progress and certain activities undertaken directly by the government do not by itself constitute economic planning. In order to ensure that a country has undertaken planned economic development, it has to be demonstrated that certain achievements have taken place, which would not have been made in a free market economy.1 It maybe argued that manv of the government sector productive units, which run at a loss, would not have been undertaken if the departure from free pricing had not become a part of the system. This argument, nevertheless, is inadequate insofar as the loss is the result either of sheer inefficiency or of a government policy to pay for the production from the general revenue (instead of producing an enterprise level surplus) or of a combination of both. Most of such undertakings could have been run on a profit basis were it not for some muddle-headed thinking.

GJVP and Investment

Planning preconceives a departure from resource allocation in terms of market prices. In turn, this has two specific implications. The first is that production decisions are deliberately taken with the view that benefits accrue after a longer period as compared to decisions taken from an individual viewpoint. In other words, cognizance is taken of the generally accepted notion that the social rates of discount or interest are substantially lower than the individual rates of discount. The second implication is that scarcities as indicated by current relative prices are not permitted to affect allocation decision^ irrespective of whether such decisions affect productive resource allocation, between different types of goods and services, at any particular moment of time, or between the present and the future, or for that matter, of any combination of the two. It follows from these two implications that a much larger part of the current national product would normally be diverted to investment, and that too in heavy industries, when an economy is being planned for development.2



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