Indicative planning

Indicative planning is a form of economic planning implemented by a state in an effort to solve the problem of imperfect information in market and mixed economies in order to increase economic performance. However, indicative planning takes only endogenous market uncertainty and plans the economy accordingly and does not look into exogenous uncertainty like technology, foreign trade, etc. 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.

This method of economic planning originated in France after the Second World War and was carried out by the Commission General du Plan. The underlying concept behind indicative planning is the early identification of oversupply, bottlenecks and shortages so that state investment behavior can be modified in a timely fashion to reduce the incidence of market disequilibrium, with the goal being a concerted economy. Indicative planning was one aspect of dirigisme.

Since the 1978 economic reforms in China, the state reduced its role to directing economic activity rather than managing it through directive plans. By the early 21st century, the Chinese government had limited the role of directive mandatory planning to goods of national importance and large-scale construction, while increasing the scope of indicative planning and market forces in all other sectors of the economy. The current Chinese Socialist market economy is largely based on market forces for consumer goods and indicative planning for heavy industry in the public sector.

The Soviet Union utilized indicative plans for its state-run economy up until 1928, before they were integrated into mandatory planning under the Supreme Council of the National Economy and later by the Gosplan.Alexei Kosygin's 1965 Soviet economic reform tried to introduce some sort of indicative planning in the USSR.

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