To accelerate and strengthen market mechanism:
(i) The market mechanism works imperfectly in underdeveloped countries because of the ignorance and unfamiliarity with it.
(ii) A large part of the economy comprises the non-monetized sector.
To remove unemployment:
Capital being scarce and labour being abundant, the problem of providing gainful employment opportunities to an ever-increasing labour force is a difficult task.
To achieve balanced development:
In the absence of sufficient enterprise and initiative, the planning authority is the only institution for planning the balanced development of the economy.
i) Development of Agriculture and Industrial Sectors:
The need for developing the agriculture sector along with the industrial sector arises from the fact that agriculture and industry are interdependent.
ii) Development of Infrastructure:
1. The agriculture and industrial sectors cannot develop in the absence of economic and social overheads.
2. " The building of canals, roads, railways, power stations, etc., is indispensable for agricultural and industrial development.
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.
To remove poverty and inequalities:
1. " 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 65 years?
2. " Hence, Arthur Lewis says, "Planning is more necessary in backward countries to devise ways and means and to make concerted efforts to raise national income".

Economic development is measured on the basis of four criteria

Gross National Product (GNP):
(i) GNP is the total market value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country.
(ii) GNP is one measure of the economic condition of a country, under the assumption that a higher GNP leads to a higher quality of living, all other things being equal.
GNP per capita:
(i) This relates to increasing in the per capita real income of the economy over the long period
(ii) This indicator of economic growth emphasizes that for economic development the rate of increase in real per capita income should be higher than the growth rate of population.
Welfare:
(i) Economic development is regarded as a process whereby there is an increase in the consumption of goods and services by individuals.
(ii) From the welfare perspective, economic development is defined as a sustained improvement in health, literacy, and standard of living
Social Indicators:
(i) Social indicators are normally referred to as basic and collective needs of the people
(ii) The direct provision of basic needs such as health, education, food, water, sanitation, and housing facilities check social backwardness.

1. Human Resources:
Human resource is named as human capital because of its power to increase productivity and thereby national income. There is a circular relationship between human development and economic growth.
2. Technical Know-how:
As the scientific and technological knowledge advances, more and more sophisticated techniques steadily raise the productivity levels in all sectors. Schumpeter attributed the cause for economic development to innovation.
3. Political Freedom:
The process of development is linked to political freedom. DadabhaiNaoroji explained in his classic work ‘Poverty and Un- British Rule in India’ that the drain of wealth from India under the British rule was the major cause of the increase in poverty in India.
4. Social Organization:
People show interest in the development activity only when they feel that the fruits of development will be fairly distributed.
5. Corruption free administration:
Corruption is a negative factor in the growth process. Unless the countries root-out corruption in their administrative system, the crony capitalists and traders will continue to exploit national resources.
6. A desire for development:
The pace of economic growth in any country depends to a great extent on people’s desire for development
7. Moral, ethical and social values:
These determine the efficiency of the market, according to Douglas C. North. If people are not honest, the market cannot function.
8. Casino Capitalism:
If People spend a larger proportion of their income and time on entertainment liquor and other illegal activities, productive activities may suffer, according to Thomas Piketty.
9. Patrimonial Capitalism:
If the assets are simply passed on to children from their parents, the children would not work hard, because the children do not know the value of the assets.

I. Classification on the Basis of Benefit:

1. Human Resources
(i) Human resource is named as human capital because of its power to increase productivity and thereby national income. There is a circular relationship between human development and economic growth.
(ii) If labour is efficient and skilled, its capacity to contribute to growth will be high. For example Japan and China.
2. Technical Know-how: As the scientific and technological knowledge advances, more and more sophisticated techniques steadily raise the productivity levels in all sectors.
3. Political freedom: The process of development is linked with the political freedom.
4. Social organization: People show interest in the development activity only when they feel that the fruits of development will be fairly distributed. Mass participation in development programs is a pre-condition for accelerating the development process.
5. Corruption free administration:
Corruption is a negative factor in the growth process. Unless the countries rootout corruption in their administrative system, the crony capitalists and traders will continue to exploit national resources. The tax evasion tends to breed corruption and hamper economic progress.
6. Desire for development:
The pace of economic growth in any country depends to a great extent on people's desire for development.
7. Moral, ethics and social values:
(i) These determine the efficiency of the market.
(ii) If people are not honest, market cannot function.
8. Casino Capitalism:
If People spend larger proportion of their income and time on entertainment liquor and other illegal activities, productive activities may suffer.
9. Patrimonial Capitalism:
If the assets are simply passed on to children from their parents, the children would not work hard, because the children do not know the value of the assets. Hence productivity will be low.

7 pillars of effective governance:
NITI AAYOG