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Concept
Indicative planning
Summary
Indicative planning is a form of economic planning implemented by a state in an effort to solve the problem of imperfect information in market economies by coordination of private and public investment through forecasts and output targets. The resulting plans aim to supply economically valuable information as a public good that the market by itself cannot disseminate, or where forward markets are nonexistent. However, indicative planning takes only endogenous market uncertainty into account, plans the economy accordingly, and does not look into exogenous uncertainty like technology, foreign trade, etc. Indicative plans serve to complement and enhance the market, as opposed to replace the market mechanism, hence they are adopted in market-based and mixed economies and were most widely practiced in France and Japan before the 1980s. When utilizing indicative planning, the state employs "influence, subsidies, grants, and taxes [to affect the economy], but does not compel". Indicative planning is contrasted with directive or mandatory planning, where a state (or other economic unit) sets quotas and mandatory output requirements. Planning by inducement is often referred to as indicative planning.
Indicative planning is coordinated information that guides the choices of separate state and private entities in a market economy or mixed economy.
Eighth Five Year Plan (1992 - 1997) adopted Indicative Planning in India. Eighth Five Year Plan (1992 - 1997) was for managing the transition from a centrally planned economy to market led economy through indicative planning.
Indicative planning originated in France after the Second World War by Charles de Gaulle in 1946 to strengthen the French economy and offset the demands of socialists and Communists calling for socialization of the means of production and/or Stalinist command planning. Indicative planning was one aspect of dirigisme that lasted until the 1980s. Indicative planning was carried out by the General Planning Commission.
Official source
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