Levels or Stages of Economic Planning, Planning: Objectives and

Importance of Planning

• INTRODUCTION

• Economic planning is often regarded as technique of managing an economy. When the structure of an economy becomes complex and subject to rapid change and transformation (due to population growth, discovery of resources, industrialization, etc.) some sort of advance thinking becomes necessary to resolve that complexity and to prepare the economy for those changes. Such preparation is called planning.

• It should be noted that a plan is just a programme of action, it is not a guarantee for action. In short, a good plan is one which makes adequate provisions for and ensures that its targets are properly fulfilled.

• There are several stages that are considered in the plan process of an economy. They includes:

• The main process or stages of planning are as under:

• 1. Formulation of Plan:

• The formulation of the development plan is the first stage of the economic planning.

To do this, the Planning Commission formulates a draft plan in consultation with the various ministries or economic councils.

First of all, Planning Commission lays down tentatively certain general goals for the long time, i.e., for fifteen or twenty years, after making a careful analysis of technical possibilities, the basic and non-basic needs of the economy and various methods of development.

• In the second stage, the Commission formulates a short memorandum which is placed before the cabinet and the National Development Council.

• In the third stage, a draft outline of the Five Year Plan is prepared keeping in view observations made by the National Development Council

• This is presented before the Parliament for discussion and approval and latter on sent to different Central Ministries, State bodies and State Governments. In short, these proposals are discussed widely in the press, universities and other institutions.

• 2. Execution or Implementation of the Plan:

• In most of the planned economies, the Central Planning Commission is merely an advisory body. The execution of the plan is entrusted to the central administration which involves the various agencies and departments of the government. In the execution of a plan societies that are decentralized are more effective because decentralisation brings effective control and administration.

• Even the most planned countries like Russia and European countries are tending to establish democratic decentralization. This tendency is also being followed in Nigeria as well. Proper execution is really a difficult task and unfortunately this has happened in the case of Nigeria planning. In the words of Prof. Lewis, “Nigerians are better planners than doers”.

• 3. Supervision of the Plan:

• The Supervision stage is very key and it must be carried out by a special body that is different from the executors of the plan. Supervision is important because it helps to detect failures and shortcomings from time to time in execution process of plans

• Constant supervision improves the conditions of successful implementation of the plan. In Nigeria, supervision is done by the planning agency or a special agency who are meant to understand the plan and implementation process and be impartial in their approach

• 4. Programme Evaluation Organisation:

• Every programme should always be assessed in a systematic way to determine whether the objectives of the plan are achieved. Hence evaluation process comes after the implementation of the plan. The evaluation process is key because economies are dynamic. There could be changes in population sizes or sudden occurrence that affects the plan objective. The evaluation process identifies such and presents these changes that affected the plan negatively to the central planning authority for consideration in future plans.

• Objectives of Planning:

• The objectives of planning are many and varied. These aims are not the same for all countries, nor are they same for the same country at all times.

• Some major objectives of economic planning are:

•

• 1. Economic Development:

• The main objective of Nigerian planning is to achieve the goal of economic development. Economic development is concerned with the increase in per capita income and causes behind this increase.

• In order to calculate the economic development of a country, we should take into consideration not only increase in its total production capacity and consumption but also increase in its population. Economic development refers to the raising of the people from inhuman elements like poverty unemployment and ill heath etc.

• 2. Increase Employment:

• Another objective of the plans is better utilization of man power resource and increasing employment opportunities. Measures have been taken to provide employment to millions of people during plans. In some development planning document, estimates of the number of employed individuals are out rightly stated.

• 3. Self-Sufficient:

• It has been the objective of the plans that the country becomes self-sufficient regarding food grains and industrial raw material like iron and steel etc. Also, growth is to be self sustained for which rates of saving and investment are to be raised. The main objective of a good development Plan is to get rid of dependence on foreign aid by increasing export trade and developing internal resources.

• 4. Economic Stability:

• Stability is as important as growth. It implies absence of frequent end excessive occurrence of inflation and deflation. If the price level rises very high or falls very low, many types of structural imbalances are created in the economy.

• Economic stability has been one of the objectives of development plan in Nigeria. Some rise in prices is inevitable as a result of economic development, but it should not be out of proportions.

• 5. Social Welfare and Services:

• The objective of the five year plans has been to promote labour welfare, economic development of backward classes and social welfare of the poor people. Development of social services like education, health, technical education, scientific advancement etc. has also been the objective of the Plans.

• 6. Regional Development:

• Different regions of Nigeria are not economically equally developed. Most states in the Norther region are economically backward. Rapid economic development of backward regions is one of the priorities of development plans to achieve regional equality.

• 7. Comprehensive Development:

• All round development of the economy is another objective of development plans. Development of all economic activities viz. agriculture, industry, transport, power etc. is sought to be simultaneously achieved.

• 8. To Reduce Economic Inequalities:

• Every Plan has aimed at reducing economic inequalities. Economic inequalities are indicative of exploitation and injustice in the country. It results in making the rich richer and the poor poorer. Several measures have been taken in the plans to achieve the objectives of economic equality specially by way of progressive taxation and reservation of jobs for the economically backward classes.

• 9. Social Justice:

• Another objective of every plan has been to promote social justice. It is possible in two ways, one is to reduce the poverty of the poorest section of the society and the other is to reduce the inequalities of wealth and income. A plan aims to reduce those that are blow the poverty line to the barest minimum.

• The Copenhagen Declaration at the “World Summit on Social Development” describes poverty as “a condition characterized by severe deprivation of basic human needs such as food, shelter, safe drinking water, sanitation, health, education, and information”.

• Traditionally, World Bank has used $1.25 per person a day benchmark for “extreme poverty. This benchmark is based on the average of the national poverty lines of the world’s 15 poorest countries. The $1.25 line was originally defined as the simple average of the national poverty lines for fifteen very poor countries. In 2015, the benchmark poverty line has been updated to $1.90 per person per day.

• Why the change in poverty benchmark? Three basic principles for setting the new line includes:

• Use of the most accurate and recent set of prices available to compare the real standards of living across countries.

• When defining “real terms”, the price levels that matter most for measuring global poverty are those faced by the world’s poorest people.

• Those principles led to a very simple decision rule for updating the line:

• From the world Bank:

• The $1.25 line was originally defined as the simple average of the national poverty lines for fifteen very poor countries (see Ravallion et al. 2009). We take those same exact lines (expressed in local currency units at 2005 prices), and inflate them to 2011 using each country’s own consumer price index.

• IMPORTANCE OF PLANNING

• Overall, The importance of planning lies in the fact that it is an instrument through which important socio-economic objectives are effectively achieved. In summary, the importance lie in the pursuit to:

• : increase the standard of living of the people, through a sizable increase in national income within a short period of time; A large expansion of employment by creating jobs; A reduction in all types of social, economic and regional inequalities; An efficient utilisation of the country’s resources for faster growth; Removal of mass poverty within a definite time limit through land reform, employment creation, and provision of educational and medical facilities; Attainment of self-reliance by reducing dependence on foreign capital and foreign aid.

• Importance of Planning:

• The importance of planning lies in the fact that it is an instrument through which important socio-economic objectives, unrealisable under free private enterprise, are likely to be effectively realised.

• In developing economy like Nigeria, these objectives may be broadly grouped as:

• (a) A higher rate of growth than was being realised in the absence of the plan;

• (b) A greater degree of economic equality than was possible under free enterprise;

• (c) Fuller employment opportunities for the growing labour force of a country; and

• (d) Larger provisions for capital formation as one of the principal instruments for accelerating the rate of growth.