Classification of Development

Planning
Debre Berhan University
College of Business and Economics
Department of Economics

October, 2023
Debre Berhan, Ethiopia
Classification of Development Planning

 Introduction
 Development Planning by Direction and Inducement
 Short-term, Medium-term and Long-term Development Planning
 Fixed and Rolling Development Planning
 Physical and Financial Planning
 Perspective Planning

2
Introduction

In theory, there can be varieties of planning. Planning can takes different forms on the
basis of the following factors:
• Difference in time
• Geographical area
• Institutions affected
• Media of planning
• Extent of activities covered
• Mode of executing plans

3
Authoritarian and Democratic Planning

Authoritarian Planning
 Here, the government is the centralized agency which draws the plan and
implements it. It is more comprehensive, systematic and rigid and is more
efficient.
Democratic Planning
 The plan is prepared by an expert body called the planning commission,
which is out side the government, the executive and it is finally approved by
legislature which represents the people .
 It is based on the system of free enterprise, but economic activity out side
the public is sought to be regulated and guided indirectly by incentives for
investment through fiscal or monetary policies.
4
General and Partial Planning

General Planning
 Comprehensive and integrated plan is conceived, initiated and executed by a
central authority.
 The plan covers all aspect of the economy and the central authority
completely controls the investment and utilization of the resources..
Partial Planning
 As against general planning, partial planning is a sort of piece –mail
planning in which the plan covers only some important sectors of the
economy.

5
Development Planning by Direction and Inducement

Planning by Inducement
 Also called indicative planning (or planning in indirect manner)
 The state just offers certain inducements & incentives (ex: subsidy, price
fixation, taxation, etc.); and the market will work by itself.
 Or the state tries to stimulate the market by means of inducements &
incentives.
 It is planning through the market mechanism or is planning by
manipulating the market.
 Common in capitalistic economy.

6
 Con’t . . .
 Plan implementation is not binding or mandatory. It is optional, market-
oriented.
 For example, if the planner is intended to increase production/consumption of
a commodity, he either subsidize production or control prices which are an
inducement for producer & consumer respectively.
 The government seeks to influence economic and investment decisions by
offering incentives to entrepreneurs via fiscal and monetary policies instead
of controlling the functioning of the economy directly.
 It avoids swollen bureaucracy. Thus, it is planning by persuasion rather than
compulsion. There is freedom of enterprise, freedom of production and
consumption subject to some regulation or control by the state.

7
 Con’t . . .

Planning by Direction:
 Sometimes called imperative planning. The central authority is in sole
charge of planning, directing and execution of the plan in accordance with
predetermined targets and priorities.
 The economic authority is completely concentrated in the state; not in
the market.
 Minute and detailed instructions is being given both to producers and
consumers; a list of all commodities to be produced with the quantity of
each has to be prepared as well as a separate list for each of the
complements and substitutes.
 It is very comprehensive and covers the whole economy.
 Can guarantee the success of the plan.
8
Short‐term, Medium‐term and Long‐term Planning

A. Long-term Plan:
 Provide a perspective about the future in terms of societies objectives.
 Provide a vista of vision of the future.
 It also allows the planner to bring a structural change civilization, societal
changes and science and technology.
 Does not provide precise targets but only provides magnitudes in terms of
major variables like the growth of national output, investment, GDP,
population growth, etc.
 Covers a time frame of long periods: 10, 15, 20 years & more.
 Is not fixed; rather changes with a passage of time.
 It provides greater freedom of choice and broaden scope.
9
 Con’t . . .
B. Medium-term Plan:
 Covers a periods of 5-10 or 3-7 years which is considered reasonably in terms of a
period of business cycle.
 The period is between long-term & short-term planning; & is justified as a period
enough for planners to correct the mistakes.
 It has one good year, one bad year and 3 average years which makes a period of 5 years.
 Specify objectives mostly in the form of quantified targets which relates with long-term
plan.
 Not operational.
 Acts as a link between long-term & short-term plans.
 Presents a frame work for drawing up a short-term plan.
 Accommodates changes both in long-term & short-term plans & transmit the changes to
10 both plans.
 Con’t . . .

C. Short-term Plan:
 Cover a period of one year and are operational plans.
 Is also termed as controlling plan - the government gets authority from
parliament to spend money, which is usually one year.
 Is a period where the resources are actually matched to requirement of
targets.
 Controls the actual action of the medium term plan.

Generally,
 Long-term plans - clarify the perspective and the vision of a society ;
 Medium-term plans - concretize aspirations in quantitative terms for a short-term plans
11  Short-term plans - provide action.
 Fixed and Rolling Development Planning

Fixed Planning:
 Builds up a planning apparatus which is of a permanent character.
 Its goals and targets are fixed whether in the short-term or a long-term plan.
 A fixed plan lays down definite aims and objectives which are required to be
achieved during the plan period. e.g.: plan in Russia & India.

12
 Con’t . . .
Rolling Plan:
 Is not fixed rather it rolls or changes every time.
 Every years, 3 plans are prepared.
 First, there is a plan for the current year. This plan would determine economic activity
during the next following year.
 Second, one plan for the next following short period of same few years, say, five
years pattern adjusted annually through the relation of the year which has just passed
and the inclusion of an additional fifth year.
 Third, one perspective plan for 10 or more years where the broader goals are stated.
 The main idea of rolling planning is that the medium-term plan would be
renewed at the end of each year and the number of years would remain the
13 same as the plan rolled forward in time.
 Regional, National and International Planning

Regional Planning
 Regional planning pertains a regional with homogeneous features ,this sameness
may be irrespective of natural conditions like the climate ,geographical location
,the resources , cultures etc. Regional planning is done as part of national planning
.Regional planning undertake for several reasons.
a) It enables to develop potentialities peculiar to the region.
b) It enables to accommodate regional disparities and to bring them up to an equal level.
c) It is important to encourage local initiative and for seeking cooperatives of the people for the
execution of the national plan.
d) It is helpful in meeting the spatial requirement of region.
 However, this regional planning has the limitation that if the region happens to fall
in more than one political unit. In such cases, it is a problem of how to bring
14 together the people of different units.
 Con’t . . .
National Planning
 It enables a country to bring together the various regional plans in a single frame.
National planning implies centralized direction and control .i.e. it is an aggregation
of regional planning .
Rationale
 National planning is the only sort that must exist before one can even
legitimately speak of regional ore international planning. The other two plans
draw off from national plan.
 The resources of a country are effectively utilized in the sense that politically it
becomes possible to make full use of national resources even if these regional
and international plans are provided.
 Centralized control which a national plan permits makes for a rational use of
15 resources
 Con’t . . .
International Planning
 Concerns countries in relation to one another. It involves the use of their resources
with the help of plans .Actually, there is no such planning at present. A very limited
forms of this nature however exists in respect of certain selected activities e.g.
FAO- it is not widely practiced .
 International planning confers a number of benefits to countries. It has many
advantages
i. It enables countries to extend their reach to the world market.
ii. Countries can be benefited from economies of scale.
iii. To avoid war
iv. To avoid economic friction
v. To assist LDCs
vi. Promote even distribution of world resources.
16
 Con’t . . .

Area Planning
 It involves all sectors and agencies in the area and which attempts to integrate all
activities with a whole.
 It tries to achieve functional and spatial harmony between the activities of different
sectors .In this sense, this type of plan can be called as “integrated area planning”.

17
 Sectoral and Area Planning

Sectoral Planning
 It is planning for a particular part or sector of a country‘s development .It is
prepared for sectors such as agriculture, transport, manufacturing etc..
 Sectoral plans are normally prepared for the whole country. In other words ,
sectoral plans refer to a larger functional rather than an areal correspond to the
division of responsibilities between the government ministers, department or
agencies.
 It is therefore the most common forms of planning and the national plan is
compiled these sectoral plans .The main limitation of this plan is conflict or
duplication of plans. Therefore , it needs coordination at the national level and
through the development of area based planning .
18
 Physical and Financial Planning
Physical Planning:
 Is an attempt to workout the implications of the development effort in terms of factor
allocations and product yields so as to maximize incomes and employment.
 Consider resources in real terms; not in money.
 The planning authority works out how much land, labor, materials and capital equipment
will be required to implement the plan and achieve the targets set out for it.
 Makes for concreteness in planning.
 It is an input‐output analysis. It implies proper evaluation of the relationship between
investment and output.
 The targets are set in physical units.
 Here, the planners have to determine not only the amount of investment but also workout
its composition in terms of the various goods and services required to obtain a certain
increase of output of product.
 Physical planning is not enough to prepare a sound plan for economic development. It has
19
to be supplemented with financial planning.
 Con’t . . .
Financial Planning:
 Consider resources in monetary terms.
 The planners determine how much money will have to be invested in order to
achieve the predetermined objectives or targets.
 Total outlay is fixed in terms of money on the basis of growth rate to be achieved,
the various targets of production, estimates of the required quantity of consumer
goods and the various social services, expenditure on the necessary infrastructure,
etc., as well as revenue from taxation, borrowings and savings.
 The essence of financial planning is to ensure that the demands and supplies are
matched in a manner which exploits physical potentialities as fully as possible
without major and unplanned changes in the price structure.
20
 General and Partial Planning

General Planning:
 Comprehensive and integrated plan is conceived,
 It is initiated and executed by a central authority.
 The plan covers all aspect of the economy and the central authority
completely controls the investment and utilization of the resources.
Partial Planning:
 As against general planning, partial planning is a sort of piece-mail
planning in which the plan covers only some important sectors of the
economy.

21
 Functional and Structural Planning

Functional Planning:
 An attempt with in the existing socioeconomic framework.
 It assumes that planning is possible even in a capitalist economy.

Structural Planning:
 It seems to change the existing order radically.
 Advocates of structural planning think that planning and capitalism are
incompatible. (e.g. Dr. Ludwig ). However, professor Landuer holds the opinion
that planning and capitalism could be reconciled.

22
 Authoritarian and Democratic Planning

Authoritarian Planning:
 Here, the government is the centralized agency which draws the plan and implements it.
 It is more comprehensive, systematic and rigid and is more efficient.

Democratic Planning:
 The plan is prepared by an expert body called the planning commission, which is out side the
government, the executive and it is finally approved by legislature which represents the people
 It is based on the system of free enterprise, but economic activity out side the public is sought to
be regulated and guided indirectly by incentives for investment through fiscal or monetary
policies.

23
 Thank You!!!
24