What is Economic Planning?

Planning is a pervasive function of management and it chalks out a course of action for the enterprise to follow. Planning enables to provide for uncertain future. Planning makes it possible for things to occur which would not otherwise happen and it is mental exercise which requires the use of intellectual facilities. There are two aspects of Indian Planning:

1. Management aspect of Indian Planning
2. Economic aspect of Indian Planning.

In management aspect of Indian planning, we make use of planning for the betterment of business enterprise. Planning is concerned with thinking before doing and deciding in advance what is to be done, how is it to be done, when is it to be done and who is to do it.

According to Theo Haimann, “Planning is deciding in advance what is to be done. When a manager plans, he projects a course of action for the future, attempting to achieve a consistent, coordinated structure of operations aimed at the desired results”.

Planning is universal and every business unit has to plan its economic activity. Planning lays down the means to achieve objectives. Planning is an intellectual process and requires mental exercise. On the basis of facts and figures, planning lays down a course of action to be followed. Planning is always a continuous and perpetual process and if circumstances prevail, changes and modifications are regularly done in the planned course of action on account of changes in environment. Planning must be precise as to its meaning, scope and nature. Finally, in the nature of planning we can say that it covers the entire enterprise will all its segments and every level of management.

Planning must provide some basic concepts like objectives, policies procedures, programs and budgets. Objectives are basic plans which decide goals or end results of the projected actions of an enterprise, Policies provide guide to action. These are generally statements which guide or channel thinking in decision making of subordinates. Procedures indicate the specific manner in which a certain activity is to be performed. A procedure is thus a standing plan which lays down a sequence of step by step actions that are repeatedly followed. It may be durable like policies, but they are not as flexible as policies are Program lays down the course of action that are executed to obtain established set objectives. Programs are necessary for both repetitive and non-repetitive courses of action. Programs are made of many small plans where each plan contributes to the accomplishment of the overall objectives of the enterprise. Budget is an instrument used by management for planning the future course of business. In other words, budgets are plans containing statements of expected results in numerical terms. Budgets and programs are closely interrelated. Many programs are implemented by means of some budgets; the budgets themselves are very often utilized as the entire program in many business enterprises.

Plans can be divided in a number of ways. A manager prepares various types of plans in order to achieve the objectives of an enterprise. According to the nature and use of planning different plans can be divided into three groups, i.e.

(a) Basic Plans
(b) standing Plans
(c) Master plans.

For all types of planning and operations, basic plans are necessary. The entire planning activity is geared into action through the formulation of objectives and strategies. Standing plans serves as a guideline to managerial action. It provides readymade answers to a given situation. Standing plans include policies and procedures which have application only in repetitive action. Master plans indicate the complete course of action along with timing and strategy consideration. There are some types of plans, viz.

(i) Short Range and Long Range Plans
(ii) Financial and Non-Financial Plans
(iii) Formal and Informal Plans

In order to achieve fundamental objectives of the enterprise, a long term plan covering a period of 20 to 25 years are taken. Short range plans are made for guiding the day to day actions of an undertaking. There plans are generally for one year only. Plans dealing with monetary aspects are financial plans and non-financial plans relate to the physical resources of concern. Formal plans are always considered better because they are written whereas informal plans are unwritten and it involves a more thinking on the part of the managers.