Market Forces and Planning

Abstract

The role of market forces in the process of economic development has been a central issue in development theory and planning for quite a long time. However, the debate on market versus plan has gained great contemporary interest because some of the earlier hopes entertained about the efficiency of planning, especially centralised planning, as an instrument of social and economic transformation have not been fulfilled by recent events. Clearly we have to learn from experience and a rethinking on certain issues is called for. I have, however, noticed that there is a great deal of impatience shown by political authorities who would like to institute ‘instant reforms’ to put an end to their current pressing difficulties, many of which result from long-standing deficiencies of economic structure. When planning was recommended as a method of overcoming structural backwardness in countries such as India, emphasis was placed on the ability of the planners to take a non-myopic view of the future, along with ability to pool relevant information pertaining to different sectors. In technical terms, the two major issues which planning was expected to overcome were the sub-optimality of the savings rate and the removal of ‘secondary uncertainty’. Further, considerable importance was attached to the possibility that planning offers in mobilising resources, such as surplus rural population or underemployed labour in services.