The 11 main Reasons that were Consider for the Failure of Centralized Planning are listed below:
(i) Deficiencies in plans and their implementation. Overambitious plans, when try to accomplish too many objectives at once without considering conflicting and competing objectives often fails to attain desired goals.
(ii) Insufficient and unreliable statistical data.
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Compounded by absence of (or inadequate supply) of qualified statisticians, economists & other planning personnel the attempt to formulate a comprehensive plan does not succeed.
(iii) Unanticipated economic disturbances. Both external and internal.
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(iv) Institutional Weaknesses:
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a. Lack of continuous dialogue between administrators, planners and political leaders about goals and strategies.
b. Incompetent and unqualified civil servants.
c. Cumbersome, bureaucratic controls.
d. Resistance to change or any innovation
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e. Lack of commitments.
f. Widespread phenomenon of political and bureaucratic corruption.
g. Lack of national as opposed to personal interest.
(v) Lack of political will:
Political will requires usual ability and a great deal of political courage to challenge powerful elites and vested interests groups and to persuade them that such developments is in the long term interest of all citizens.
(vi) PSU’s have incurred losses with little or no surpluses. Inefficiency is inherent in public monopoly.
(vii) Administered prices:
Since most of the prices, in particular of the PSU’s are administered prices, they do not reflect the true relative securities and cost of resources. This distortion of price result in either excess or inadequate allocation of resource in many lines of investments.
(viii) Inflexibility is inherent and results in severe distortions and imbalance in the economy, e.g., rigidity of the mobility of resources products and their prices.
(ix) Inefficient use of resources leads to high cost generation. In a number of cases, these costs take the form of large subsidies, which again the Government budgets have to bear.
(x) These shortcomings manifest themselves in the form of shortages, underground transactions, and over fulfillment of some targets and the under fulfilment of others.
(xi) Absence of competitive environment:
Planning is inward looking, there are a number of restrictions in the form of licensing quotas, foreign exchange availability etc. which narrow the scope for free trade and prevent the economy from developing along the lines suggested by comparative advantage.