Meaning of Economic Planning

Economic planning is a process which involves the following steps:

  • Preparing a list of the problems facing the economy.
  • Rearranging the list on the basis of priority. The top priority issue which needs to be addressed immediately should be placed at number one and so on.
  • The next step is to identify the problems which are to be solved in the immediate short-run and the other problems which are to be addressed over the long period.
  • Fixing a target to achieve the desired goal. The target could be a specified time period within which the problem must be solved. If the problem is to be addressed over long run, then it must be made clear that how much of the problem be solved in the first period (say a year or six months) and so on. Secondly, the target could be a certain quantity to be achieved. Say in case of production, the government can fix some target in terms of quantity.
  • Estimating the amount of resources needed for achieving the target. Resources include financial resource, human resource, physical resource etc.
  • Mobilizing the resources is another important task. This means that the planners must know the sources of arranging the required resources. For example, in case of financing the plan, the planners must make the budget and spell out the different sources of finding. When the government makes plan, one of its major source of getting funds in the tax revenue. For a business person, one of the sources of finance is the loan from bank. When various sources of funds are available then the planner must also decide as to how much fund to be collected from each of these sources. Use of the human resource is another important task to execute the plan proposal. The planner must estimate the type of man power and the number of persons required to carry out the task. A proper estimate on this requirement should be given at the outset. Similarly proper estimate of physical resources should also be provided. Physical resources include office buildings, vehicles, furniture, stationeries etc.
  • Once the resources are arranged, implementation and execution process starts in an organize manner to achieve the desired goal. To make sure that everything is running smoothly and to rectify mistakes if any or to modify the style of working to accommodate any change, periodic review must be done till the final achievement is realised.