What Is Meant By Planning?

It is planning where the formulation and implementation of the plan is made by the central planning authority. The central agency is held responsible not only made by the central planning authority. The central agency is held responsible not only for the preparation of the plan, but also of its implementation and execution in a definite manner. Here once the plan is drawn, then it is enforced. Accordingly, such plan is also given the name of direction planning.

This enforcement of the plan may be made through command system or price mechanism. Thus a set of directions are made issued to economic units like firms etc. to fulfill the plan targets. Accordingly, it becomes the duty of the state to provide necessary supplies like raw material, machine, manpower and entrepreneurs as all such resources are owned by the state. If imperative planning is made through price system, then an integrated price structure is evolved to ensure that resources will be utilized in accordance with the plan picture. In the earlier phases of Russian planning directive method was followed; but with the passage of time role of price system has also increased in connection with the imperative planning, particularly after the disintegration of Soviet Union.

In such planning all the resources are owned or controlled by the sate. Accordingly, not only the resources can better be allocated, but the plan targets can also be realized.
Imperative planning is justified in the initial stages of development where the prime objective is to raise the growth rate of the economy and spare more resources for productive investment.

Despite the practical demerits, it is the imperative planning which has been provided a stronger basis in all the former states of Soviet Union. This type of planning is appropriate for those economies where there is less variety in the number of economic groups. Moreover, this type of planning is more suitable in case of poor countries where a big push is required to replace the existing social and economic set-up.

This could be done in a better way if the government or state dominates in the economic planning.
Imperative planning involves planning for the economic units, whereas in indicative planning, planning has to be made for the economic units outside the government. thus the indicative planning often practised in capital countries is concerned with the indicating what is desirable. While imperative planning not only plans what is desirable, but also ensures that economy should shape it according to the plan requirements.

In Imperative Planning, Command hierarchy completely replaces the market mechanism but in case of Indicative Planning the market mechanism is considered to be a way for the market system to function better. The economic activities in imperative planning belong to the public sector but in indicative planning all of these activities belong to the private sector. In indicative planning the need for nationalization of the industry is not there. Through imperative planning, it is relatively easier to achieve goals and targets.