5 Major Problems of Economic Planning in Underdeveloped Countries

In the underdeveloped countries the adoption of economic is not being done in the spirit because there are many impediments and problems in its way.

Let us explain these problems in detail:

1. Planning is the Urgent Need:

Nobody can deny that planning is perhaps more necessary but more difficult to implement in underdeveloped economies.

The reason is that planning requires a very strong, efficient and honest administration.

But such a strong, efficient and honest administration does not exist in underdeveloped countries. In these economies the task of planning should be undertaken by the creation of a highly trained and disciplined class.

2. Objectives before Planners:

The first objective of planners in UDCs should be to create an administrative machinery. The planners should see that the quantity and form of planning should be strictly in accordance with the administrative machinery. Moreover, the Government has to break much ground in doing normal expected functions before it can indulge in controversial subject which planning may involve.

3. Backward Agriculture:

It has been noticed that in an underdeveloped country, depressed agriculture is the crux of the problem. As agriculturists are illiterate and backward, rapid economic progress may not be possible. But once the farmers are filled up with the desire to make progress, perhaps many difficulties may be overcome.

4. Traditional agriculture vs. Modern Agriculture:

Another problem faced by agricultural economies is the small size of holdings. Agricultural progress is not possible unless the country goes through an agrarian revolution which contains work on large holdings with machinery. The success depends on how popular Government can awaken sufficient enthusiasm among masses to carry through such a revolution by consent. Unfortunately, intensive and large-scale farming requires fewer people per acre than the small holdings.

5. Investment and Borrowing or Deficit Financing:

Unemployment is an other problem which an developed country faces. The problem cannot be solved by the creation of money alone, but large-scale Government activity is required. But the control of foreign exchange in itself may not solve the problem because the new money that is created will force the prices up.

In an industrial country, an increase in quantity of money is likely to increase employment and output which may not be the case in an underdeveloped or agricultural country, even where there is unemployment. An increase in the quantity of money as experienced in an underdeveloped country is generally likely to reduce output.