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P LANNING P ARADIGM Economic Planning and Industrial Policy For several reasons national economic planning is required in a developing country like India but it should account for challenges of rapid change due to technological advances and globalization opting for a middle way between the two extremes of central planning and over reliance on market signals — a framework for avoiding the corner solutions Raj Aggarwal Sullivan Professor of International Business and Finance, University of Akron 22 THE IIPM THINK TANK The debate on economic planning often ends up with people in two opposite corners — those that believe in government-led central economic planning in one corner versus those that believe in relying completely on market signals in the other opposite corner. The reality is that neither corner is a desirable place. Government economic planning has a diffi cult time picking winners and avoiding being hijacked by powerful interests while market signals have just as often proven to be unreliable as shown, for example, by the recent 2008-09 global fi nancial
crises. This note contends that the best form of economic planning avoids either extreme corner. Economic planning has been considered important in India at least ever since independence. We have had a number of fi ve year plans over the last sixty plus years. India has made remarkable progress in this period with especially rapid progress since the deregulatory moves of the early 1990s. Nevertheless, the role played by economic planning can be and is being vigorously debated in In- dia. Indeed, national industrial policy remains controversial globally. Even in corporations and other organizations, where strategic and operational planning is widely adopted, smart executives recognize the limitations of such exercises. While planning allows an or- I NTEGRATED PLANNING ganization to prepare its responses to events and environmental changes, it limits fl exibility and nimbleness – two qualities that become critical in environments that change rapidly. Business planning seems to work best in a static or slow moving environment. It seems the same may be true for nations. The year 1989 seems to have been a turning point for economic planning. That year saw the break-up of the Berlin Wall, a symbolic affi rmation of the fall of communism. 1 It was also the year the remarkable growth of the Japanese economy peaked. The communist countries and Japan were both known to have built their considerable economic successes with heavy reliance on national economic planning and industrial policy (Aggarwal, 1999a). After 1989 most of these centrally planned countries started converting their economies to rely much more on market signals to guide economic growth. Similarly, other countries that already had market-based economies started down a similar path with a strong focus on de-regulation. Interestingly, this global move towards less reliance on national economic planning and regulation lasted for about two decades until the developed country fi nancial crises of 2008-09. Over-reliance on free markets and too little regulation seems to have THE INDIA ECONOMY REVIEW 23
Page 1 and 2: THE INDIA ECONOMY REVIEW Volume VII
Page 3 and 4: IIPM: THE FUTURE IS HERE Since its
Page 5 and 6: CREDITS Founder Dr. M. K. Chaudhuri
Page 7 and 8: P LANNING P ARADIGM In the State of
Page 9 and 10: P LANNING P ARADIGM Almost all wond
Page 11 and 12: P LANNING P ARADIGM Central Agency
Page 13 and 14: P LANNING P ARADIGM paign in 1992:
Page 15 and 16: P LANNING P ARADIGM The Complexity
Page 17 and 18: P LANNING P ARADIGM future from the
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Page 23 and 24: proximately 25% of the then global
Page 25 and 26: process of economic growth. Newly d
Page 27 and 28: Japanese radio with one transistor
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Page 31 and 32: in such times. The other institutio
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P LANNING P ARADIGM Whither Economi
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P LANNING P ARADIGM achieving “mo
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P LANNING P ARADIGM Table 3 . Inves
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P LANNING P ARADIGM 80 THE IIPM THI
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P LANNING P ARADIGM matic character
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P LANNING P ARADIGM Resource Data M
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P LANNING P ARADIGM Don't Throw the
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P LANNING P ARADIGM dynamic and the
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P LANNING P ARADIGM Commission from
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P LANNING P ARADIGM Commission has
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P LANNING P ARADIGM A Tale of Two C
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P LANNING P ARADIGM After the elect
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P LANNING P ARADIGM The Road to Pro
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P LANNING P ARADIGM rather through
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P LANNING P ARADIGM The road to hig
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P LANNING P ARADIGM From State to D
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P LANNING P ARADIGM began by taking
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P LANNING P ARADIGM leadership in B
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P LANNING P ARADIGM Unhealthy Plann
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P LANNING P ARADIGM made for enabli
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P LANNING P ARADIGM too failed. The
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P LANNING P ARADIGM quality of care
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P LANNING P ARADIGM 118 THE IIPM TH
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P LANNING P ARADIGM out of its reve
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P LANNING P ARADIGM Also, a good nu
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P LANNING P ARADIGM 124 THE IIPM TH
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P LANNING P ARADIGM sectors which a
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P LANNING P ARADIGM concurrent resp
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P LANNING P ARADIGM Is Big Dam a Pl
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P LANNING P ARADIGM dams in Arunach
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P LANNING P ARADIGM to enter on the
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P LANNING P ARADIGM Where's Natural
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P LANNING P ARADIGM tions there are
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P LANNING P ARADIGM livelihoods are
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P LANNING P ARADIGM Plundered Histo
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P LANNING P ARADIGM hierarchy of th
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P LANNING P ARADIGM the trend. Faul
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P LANNING P ARADIGM were employed.
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P LANNING P ARADIGM cies the govern
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P LANNING P ARADIGM the electricity
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P LANNING P ARADIGM start when cont
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P LANNING P ARADIGM Durg district.
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P LANNING P ARADIGM major provision
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P LANNING P ARADIGM image of their
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THE HUMAN FACTOR OTHER IIPM JOURNAL
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