Economic planning is a mechanism for economic coordination contrasted with the market mechanism. There are various types of planning procedures and ways of conducting economic planning. As a coordinating mechanism for socialism and an alternative to the market, planning is defined as a direct allocation of resources and is contrasted with the indirect allocation of the market.
The level of centralization in decision-making in planning depends on the specific type of planning mechanism employed. As such, one can distinguish between centralized planning and decentralized planning. An economy primarily based on central planning is referred to as a planned economy. In a centrally planned economy the allocation of resources is determined by a comprehensive plan of production which specifies output requirements. Planning may also take the form of directive planning or indicative planning.
A distinction can be made between physical planning (as in pure socialism) and financial planning (as practiced by governments and private firms in capitalism). Physical planning involves economic planning and coordination conducted in terms of disaggregated physical units; whereas financial planning involves plans formulated in terms of financial units.
Different forms of economic planning have been featured in various models of socialism. These range from decentralized-planning systems, which are based on collective-decision making and disaggregated information, to centralized systems of planning conducted by technical experts who use aggregated information to formulate plans of production. In a fully developed socialist economy, engineers and technical specialists, overseen or appointed in a democratic manner, would coordinate the economy in terms of physical units without any need or use for financial-based calculation. The economy of the Soviet Union never reached this stage of development, so planned its economy in financial terms throughout the duration of its existence. Nonetheless, a number of alternative metrics were developed for assessing the performance of non-financial economies in terms of physical output (i.e.: net material product versus gross domestic product).
In general, the various models of socialist economic planning exist as theoretical constructs that have not been implemented fully by any economy, partially because they depend on vast changes on a global scale (see: mode of production). In the context of mainstream economics and the field of comparative economic systems, "socialist planning" usually refers to the Soviet-type command economy, regardless of whether or not this economic system actually constituted a type of socialism or state capitalism or a third, non-socialist and non-capitalist type of system.
In some models of socialism, economic planning completely substitutes the market mechanism, supposedly rendering monetary relations and the price system obsolete. In other models, planning is utilized as a complement to markets.
Concept of socialist planning
The classical conception of socialist economic planning held by Marxists involved an economic system where goods and services were valued, demanded and produced directly for their use-value, as opposed to being produced as a by-product of the pursuit of profit by business enterprises. This idea of "production for use" is a fundamental aspect of a socialist economy. This involves social control over the allocation of the surplus product, and in its most extensive theoretical form, calculation-in-kind in place of financial calculation. For Marxists in particular, planning entails control of the surplus product (profit) by the associated producers in a democratic manner.[6] This differs from planning within the framework of capitalism, which is based on the planned accumulation of capital in order to either stabilize the business cycle (when undertaken by governments) or to maximize profits (when undertaken by firms), as opposed to the socialist concept of planned production for use.
In such a socialist society based on economic planning, the primary function of the state apparatus changes from one of political rule over people (via the creation and enforcement of laws) into a technical administration of production, distribution and organization; that is the state would become a coordinating economic entity rather than a mechanism of political and class-based control, thereby ceasing to be a state in the traditional sense.[7]
Physical planning refers to the allocation of resources in terms of men, materials and machinery. In physical planning, an overall assessment is made of the available real resources such as raw materials, manpower, etc., and how they have to be obtained so that bottlenecks may be eliminated during the plan. Physical planning requires the fixation of physical targets with regard to agricultural and industrial production, socio-cultural and transportation services, consumption levels and in respect of employment, income and investment levels of the economy. Physical planning has to be viewed as an overall long-term planning rather than a short-term piecemeal planning.

TYPES OF PLANNING ACCORDING TO FUNCTIONS
1. PHYSICAL AND ECONOMIC PLANNING
PHYSICAL PLANNING-is the planning of an area's physical structure-land use, communicating, utilities and has its origins in the regulations and control of town development
ECONOMIC PLANNING-is concerned more with economic structure of an area and its overall level of propriety.
2. ALLOCATIVE AND INNOVATIVE PLANNING
ALLOCATIVE PLANNING-is concern with coordination, the resolution of conflicts ensuring that the existing system is ticking over efficiency through time in accordance with involving policies.
I NNOVATIVE PLANNING-is concerned with improving, developing the system as a whole. It is known