PLANNING AND ECONOMICS Ar. Shubhranshu Upadhyay

Abstract

Planning is a multidisciplinary subject. Dealing with economics through planning is termed as

economic planning. Different subjects viz. law, engineering, architecture, statistics etc. facilitates

planning. Economics of a country, state or city develops through planning exercises. Five year plans

and multi level planning are examples of economic planning. Economics play a vital role in regional

planning as well. The scope of present paper is to explore and discuss the role of planning in

formulation of economic policies and guidelines.

Introduction

Economics is the science that analyzes production, consumption and distribution of resources.

Planning is organizing things in advance. Plan is a written document which puts the different

components of task in a logical order and assigning desired resources for timely completion.

Together economics and planning, aims towards equal distribution of resources, thereby mitigating

concentration of wealth in few hands. Balanced regional development to address problem of

reduced employment opportunities in poor areas is another arena where economic planning can

bring results. Economic growth with use of technology as a resource and adaptation to changes

pertaining to modernization is need of the day, so as to put the country on path development.

India is a low income developing economy with one fourth of its population living under conditions

of poverty and misery. All the same there remain vast unutilized natural resources which if

harnessed to their potentials can help improve economic conditions through development and

growth.

Measurable economic indicators

Indicators of economic development are per capita incomes, gross domestic product, Net state

domestic products etc.

Resources are primarily land resources, capital resources and human resources. Land and human

resources plays an important role in regional planning as they change with context and areas. Capital

resources play their limited role irrespective of locations.

Role of economics in regional planning

Regional economics is for balanced growth. It studies linkages, interfaces and interrelationships of

differentiated regions. Migration rates, flow of goods and services, counter flow of money,

economies of scale and factor of incomes are some indicators through which economics of a region

is measured and analyzed. Various sectors and regions contribute to gross domestic product.

Agriculture, industry and tertiary sector services are concentrated unequally in different regions, due

to reasons other than geographical. These aspects are better understood through eye of an

economist.

Role of economics in city or town planning.

With the advent of public private partnerships PPP model, role of economics has assumed significant

size in development of cities and towns. Finance is the back bone of any development project.

Development can not take place in the absence of finance. Any project goes through stages of

feasibility, planning, financing, scheduling, positioning and commissioning stages. All the stages of

project planning and implementation require the services of economist for ensuring its smooth and

hassle free running.

Economics of development

Development pertains to economics and the subject alone can answer our queries related to

development planning. At times best optimal situations are not taken up and sub optimal solutions

are adopted.

Political economics analysis is derived more often through non theoretical choices, where as

economic process has basis in choice theoretic plans with multiple criteria decisions. Different

criteria are being assigned different weight ages. Parato optimal is a point or stage beyond which

you can not make any one happy without making any one worse of.

Politicians tend to opt for sub optimal solutions keeping in mind their term of five years, instead of

taking up fully optimal solutions of long term horizon, which would give best results in 50 yrs.

Urban finances

Local bodies are always in want of finances. Finances are generated through various models such as

BOT1, BOOT

2, LOT

3, or contributing through own resources which comprise of revenues through tax

collections, license fees and rents on municipal properties.

Lack of awareness in ULBs as regards management of finances is the chief cause of dearth of

finances. Role of economist s desired in following

i. Identifying the sources of funds for local bodies,

ii. Techniques of financing and budgeting,

iii. Ensuring optimum utilization of resources,

iv. Evolving budgeting and accounting techniques

v. Formulating criteria for deployment of resources and disbursement of finances considering

optimal results

Observations indicate that increase in municipal expenditure, in comparison to increase in

population served is not proportional. Per capita expenditure is decreasing. This means that either

efficiency of system needs to be increased in less cost or revenue must be raised to raise

expenditure on service deliveries. In absence of any intervention the quality of services shall decay

leading to their closer and loss of revenue.

1 Build operate Transfer

2 Build own operate and transfer

3 Lease operate and transfer

Economic systems

The term refers to organization comprising of institutions developed with a view to utilize productive

resources for satiating human desires. There exists, three types of economic systems i.e. capitalistic,

communist and mixed systems.

Capitalistic economic system: It represents a system of economic organization in which instruments

of production are owned by individuals and associations and are used for making profits. The

essence of this system is private ownership of capital and the power to utilize it. American economy

is based on this model. Price is the most important and governing factor in this system of economy.

Capitalist theory involves a process in which one class is exploited. It is believed by some theorists

that this exploitation shall destroy capitalism over a period of time. The Marxian theory which

explains this exploitation is the theory of surplus values which rests on labor theory of value. The

surplus value is consumed by capitalist partially for his consumption and partially for further capital

to generate more surplus value, and the process goes on. Erstwhile Soviet Union and China are

examples of communist theory.

Mixed economic system is largely capitalistic system having government and community controls

over strategic means of production. India is an example of mixed system having strong democratic

setup and social values.

Planning policies of a country follow the kind of economic system prevalent. India has enshrined

directive principles of state policy in fourth chapter of constitution. These principles were merely

directive in nature initially during the scheme of things and were not enforceable in the Court of law.

Society is dynamic in nature. With passage of time most of these directives were found to be implicit

in our fundamental rights and hence started getting enforced through various court

pronouncements.

Economic theories of planning

Spread effects theory:

Backwash effects of international and inter regional economic relations involve unequal exchanges

so that weak are always exploited by the strong. International trade resulted in investments in

regions of high agricultural productivity and mineral abundance. These investments did not trigger

the growth impulses in the hinterland, rather it lead to large scale migrations of skilled people from

backward regions. The backward regions further deteriorated, as they are being left dry and poor.

Cumulative causation theory:

The theory is based on backwash effects and spread effects. It emphasizes poverties further

perpetuated by poverty, and affluence is further promoted by affluence which is a case of spread

effects overwhelm backwash effects. Stages of cumulative causation are (i)traditional society,(ii)

preconditions to take off, (iii)takeoff, (iv)drive to mechanization and finally (v)age of high mass

consumption.

Economics pertains to demand choice of people for purchasing certain quantities at a given price.

The fcsubject is study of human behavior where resources are limited.

Conclusions

73rd

and 74th

constitutional amendment acts gave recognition to rural and urban local bodies

respectively. Multilevel planning in India is top down in policy making and is recognized as top level

cumulative planning. Implementation however works when the approach is bottom up. Results of

multilevel planning can deliver results only when public participation is ensured. Complexities of

development are more profound in urban areas. Aiming partnerships in implementation rather than

participation shall lead to definite results.

The stages to be adopted in ensuring participation in a planning process needs to be structured.

Possible stages could be awareness, education, inputs, interaction and partnerships.