(iii) It functions smoothly; it can stimulate efficiency and growth without any elaborate administrative apparatus. (iv) Since the bureaucratic or administrative involvement is absent, the resource allocations take place on the basis of economic criteria, i.e., resources move into line where these give the maximum returns. (v) With the profit as the motive, the enterprises constantly work to reduce loss.
(vi) Ample scope of flexibility. Fixation of profits is avoided. Within a plan, the changes in prices are made in response to developments, foreseen or unforeseen, which give signals to the economic agents to adjust to the new situations. The prices are used as a signal mechanism for adjustment. This adjustment can for example be made by narrowing the range of price fluctuations in certain field for as in India the food-grain prices are allowed to move within a certain range.
Through the buffer stock policy, Government goes in for purchases when prices are falling unreasonably, and unloads its supplies when the prices tend to go beyond a certain upper limit. (vii) The market mechanism envisages forecasting rather their targeting. Forecasting provides a frame and the lines along which the economy is likely to move. It may or may not go to the expected way or to the expected extent. (viii) Active public participation plays an important role in pulling pressure on state policy and on the private sector.
Through the devolution of the planning functions to lower-level self governing, units as is being provided in the Ninth Plan (1997-2002), it will become possible to prepare realistic plans, tailored to the local need and resource, implied in this type of is the involvement of the large number of producers competing amongst themselves, with the sole objective of profit maximization through production as per the market costs and prices. Consumers get involved when they make choice among the products and services.