Home » Prerequisites of Effective Economic Planning
Development Economics

Prerequisites of Effective Economic Planning

Requisites/Strategy of Economic Planning:

It has been universally accepted that economic planning is essential for accelerating economic development in different countries, particularly third world countries. However, the experience reveals that development plans could not be successfully implemented in many LDCs. The reason for this is that these countries have not been able to create conditions that are necessary for effective planning. The successful implementation of the plan requires some pre-requisites. These conditions are as follows.

Strong and Efficient Administration:

The administration must be strong and competent enough to carry out the plan as required. It is the Government administration who prepare and plan and implement it.  If it is inefficient and corrupt the plan will not be executed successfully.

Political Setup:

The Central or Federal Government must be powerful for the implementation of a plan. In a democratic set up we often see a lack of coordination between provinces and the center due to which plans are not carried out properly. However, in a communist country, the plans are effectively implemented because of a powerful central government.

Establishment of Planning Agency:

Planning commission/agency is the most important requisite for formulation the economic planning. The planning commission may consist of trained and specialists like economists, statisticians, and engineers etc. The planning commission will be responsible for getting the information about the task to which planning is to be established.

Statistical Data:

The availability of adequate, accurate, up to date and reliable statistical information about the state of the economy, is a pre-condition for successful economic planning. In the absence of correct and adequate statistical information or data, planning will not be successful.

Objectives of Planning:

The objectives of the plan should be clear and well defined. The objectives of a plan should be made clear to the people so that they are able to cooperate in the implementation of the plan. The planners must see that the objectives do not contradict each other.

Objectives and goals like; raising the per-capita income; employment opportunities; to reduce economic and regional disparities; development of industrial and agriculture sectors; to promote foreign and domestic trade; should be decided to formulate effective planning.

Cooperation of the People:

Support and cooperation of the people is essential for the successful implementation of the plan. It is very necessary that people should feel the urge for development and welcome planning for development. People should behave in discipline and patriotic manners.

Achieving the Targets:

A plan should set targets that can be achieved during the plan period. The targets of the plan should be reasonable and appropriate. If the targets are too ambitious and unachievable, it will create doubts about the working of the planning commission. People should be clear about the efficiency of planning. Similarly, resources of a country are limited so the proper order of priorities should be laid down.

Proper Balancing:

The plan should be formulated in such a way that all the important sectors of the economy could be properly developed. There should be a proper balance in the various parts of the plan or sectoral planning. If one sector is developed at the cost of another sector, it will create an imbalance in the economy.

Financial Resources of the Plan:

Financial resources are the most important requirement for any economic planning. These requirements could be fulfilled with the help of both internal and external sources. The government should mobilize internal sources by encouraging voluntary savings or by taxes, banks borrowing and deficit financing etc.

External sources may also be used by LDCS to meet the financial requirement of sound planning. In this regard, the government may get financial or non-financial assistance from developed countries of the world.

Sectoral Allocation and Priorities:

LDCs are facing a number of problems to be Solved. But due to limited resources, it is not easy to overcome all the problems at the same time. Thus, planners have to decide which project should be taking up first and which is to be postponed. Then a plan should be made on the basis of the relative importance of the projects. The scheme of priorities should not be rigid but flexible according to the circumstances prevailing in the country.

Proper Development Policy:

Proper development policy is another desideratum of successful planning. Proper development policy should embrace careful survey of national resources, scientific research, market research, building up of adequate infrastructure (transport and communications, irrigation and power, etc.), provision of specialized training and educational facilities, suitable legal framework, assistance for the entrepreneurs, promoting saving and investment, and so on.

Determining the Rate of Growth:

The most important set of the decision in planning that relates to the fixing of the rate of growth of the economy during the plan period.


Very few under-developed countries fulfill the above conditions. That is why there is generally a wide gap between promise and performance. It is seldom that the targets are fully achieved. People get despaired and disgusted and planning loses credibility. If planning is to succeed earnest effort should be made to create the conditions which will be conducive to the success of planning.

Add Comment

Click here to post a comment