for developing the agriculture sector along with the industrial sector arises from the fact that agriculture and industry are interdependent. Reorganization of agriculture releases surplus labour force which can be absorbed by the industrial sector. Development of agriculture is also essential to supply the raw material needs of the industrial sector. ii) Development of Infrastructure: The agriculture and industrial sectors cannot develop in the absence of economic and social overheads.
The building of canals, roads, railways, power stations, etc., is indispensable for agricultural and industrial development. Infrastructure involves huge capital investment of long gestation period and low rate of return. The state alone can provide strong infrastructural bases through planning. iii) Development of Money and Capital Markets: The expansion of the domestic and foreign trade requires not only the development of agricultural and industrial sectors along with social and economic overheads but also the existence of financial institutions.
Money and capital markets are not adequate in underdeveloped countries. This factor acts as an obstacle to the growth of industry and trade. So planning alone can provide sound money market and capital market. .
To remove poverty and inequalities: Planning is the only path open to underdeveloped countries, for raising national and per capita income, reducing inequalities and poverty and increasing employment opportunities. Has it happened in India in the last years? Hence, Arthur Lewis says, “Planning is more necessary in backward countries - - Economics of Development and Planning to devise ways and means and to make concerted efforts to raise national income” . .
. Case against planning The failure of market mechanism invited state intervention in economic activities through planning. The prime goals of economic planning are stabilization in developed countries and growth in LDCs. But the economic planning also is not free from limitations.
It may retard private initiatives, hamper freedom of choice, involve huge cost of administration and stop the automatic adjustment of price mechanism. The arguments against planning are discussed below. . Loss of freedom The absence of freedom in decision making may act as an obstacle for economic growth.
Regulations and restrictions