To Increase the Rate of Economic Development
In underdeveloped countries increase in the rate of economic development is the basic objective of planning. Income, saving and investment should be increased, to enhance the level of capital formation which helps in raising the rate of economic development. People in underdeveloped countries are poor. Their income level is low which reduces the capacity of the people to save. Low saving results in lower level of capital formation. Due to scarcity of capital and lower productivity the rate of investment is low. In this situation, two methods can be used: one is planned development by importing capital from out of the country, and the other is by enforced saving which he characterizes as “Self Sufficient Industrialization.’
To Eradicate Unemployment
The need for planning is more stressed by need for eradicating the unemployment in economies. In underdeveloped countries problem of unemployment arises because of Capital being limited and labor being abundant. Due to excess labor available there arises involuntary unemployment in the economy. It can be solved by placing well powerful authority at central level and giving more power to this authority can solve this problem.
To Improve and Strengthen Market Mechanism
The need for planning is to improve and strengthen market mechanism.The market mechanisms work improperly in underdeveloped countries because of the lack of knowledge and unfamiliarity with it. The major parts of economy of under developed country consistof non-monetized sector. The production factors, money is not organized properly. The price system exists only at very basic level.Therefore, planning is required bring a match between demand and supply side of the economy and other resources.
Fair Progress of the Economy
In absence of effective efficient planning there is a greater need of setting up institution which is dedicated to only planning of economy. For faster growth of an economy the agriculture and industrial sector need greater investment,attention, effective policies from the government Import and Export needs to be kept on checked condition.There should be an effort to balance both import and export so that foreign exchange can be managed effectively.
For fair progress of the economy the following sectors are required to grow:
Progress of Agricultural and Industrial sectors
The necessity for developing the agricultural sector with industrial sector arise from the fact that agriculture and industry are dependent on each other. Reorganizing the agriculture sector will release excess man power which can be taken into system by industrial sector. Growth of agricultural sector will provide plentiful and required raw material industries.
Progress of Money and Capital Market
Growth of trade depends not only on agricultural and industrial sector along with stable growth of other financial institutions. Capital & money markets are undeveloped in countries all the countries.The growth of these markets depends on international markets and world economic conditions.
Progress in Infrastructure
For the growth of Agricultural and industrial sector the infrastructure need drastic improvements at very high pace to match the growth of agriculture and industrial sector. lf the Infrastructure lags behind it will impact the growth of other sectors. For achieving high growth rate in infrastructure in countries like public private model can be used more extensively for faster completion of infrastructure projects.
