Theory of Unbalanced Growth I 223

country and thereby derived economies from

them can be used for
remaining sectors of the economy. By this method, the
move from the
path of unbalanced growth to the economy would
path of balanced
growth. In an underdeveloped country, it is the imbalance
different sectors that enhances the economic between
Different economists have
growthb.
unbalanced growth. For the given different interpretations of
16 giving few convenience of our readers, we are here
interpretations as given by Jeading economists.
i) According to Hirschman, "Development is a chain
THEORY OF UNBALANCED GROWTH disequilibria that must be kept alive rather than eliminate the
of
Or disequilibrium of which profits and losses are the symptoms
STRATEGY (DOCTRINE) OF UNBALANCED competitive economy. If the economy is to be kept moving aheadinthe a

task of development
GROWTH policy is to maintain tensions, disproportions and
disequilibria." This definition emphasises the fact that imbalances and
tensions should be created in an
"Deliberate unbalancing of economy in accordance with a predetermined economic development. The best economy for attaining an accelerated
way to create
strategy is the best way to achieve economic growtb."
-Prof Albert Hirschman tensions is to assign top priority to the leading sectors imbalances and
in the matter of
development. The selection of the leading sectors is to be made
judiciously by the planners of the country.
INTRODUCTION (i) Prof. Alak Ghosh has
growth in these words, "Rlanningexplained
the concept of unbalanced
The theory of unbalanced growth as propounded by Prof. Albet with unbalanced growth
is just the fact that during the planning period emphasises
Hirschmnan, in his book Strategy of Economic Development, higher rate than income, and income at a higher investment will grow at a
opposite of the theory of balanced growth. The theory of unbalanced tüon." This definition rate than
economists like H. W explains the concept of unbalanced growth consumap-
growth has been supported by several leading W W rostom Paul Streeten. terms of the growth rates of investment, income and
in
Singer, Macsus Flamming, C. P Kindleberger, Y consumption. If
and so on. According to this concept, investment
should be made in
in ail sectoors of the
an d respectively denote the growth rates of investment,
selected sectors rather than simultaneously ncome and
economy. It is imbalance
rather than balance between different sectors consumption, then the unbalanced growth implies
that stimulates economic growth in underdevelopea
of the economy
of the unbalanced
countries. According to the slogan of the supporters
"Select certain strategic sectors and invest heavily .on In other words these three
growth theory, through Lin growth rates should not be uniform.
them" The other sectors would automatically develop (iii) According
to H. W
"If the economy is to be kept Singer,
kages effect. In the opinion of Hirschman, is to maintain tensions evelopment strategy to concentrate "Unbalanced
available
growth is a better
moving ahead, the task of development policy vestment, which help to make the economic resourcesmore on types of
disproportions and disequilibria" uOre capable of expansion under the stimulus of system elastic,
Meaning of Unbalanced Growth CXpanding demand." This definition lays emphasisexpanded market and
upon investment in
The theory of unbalanced growth implies
that instead of investing OCal overhead
WOuld make the capital
and removal of
specific bottelenecks which
we should concentrat entire economic system more
in all the sectors of the economy simultaneously, elastic.
seciors only. It is because tha (iv) According to B.
on certain important or strategic
underdeveloped countries are in
acute shortage of capital and as suc COnomy in accordance with Higgins,
a
"Deliberate imbalancing
pre-designed
of the
it is not possible for them to invest in all'
the sectors of the economy achieve economic growth." strategy
is the best way to
to the needs of the
The sectors should be selected cautiously according (v)
Meier and Baldwin are also of the
sh opinion that "Planners
concentrate on certain focal
S1rategy of Economic Development. apld economic points, so as to achieve the goal of
1 A. O. Hirschman: The development. The prioritics should be given to those
224| Economics of Development and Planning Theory of Unbalanced GrowthI 225
external economies to the existing firms, and
which e n s u r e
projects and overhead capital will encourage private investment later in directly
those which could create demand
for supplementary goods productive activities (DPA). For example, cheaper supply of electricity
services. may stimulate the establishment of small industries, commerce and
different leading
From the above interpretations as given by trade As a matter of fact, the private investment in productive
conclude that the theory of unbalanced growth lays activities will not be possible unless social overhead capital provides
economists, w e
and disequiibria, which should be basic services at cheaper rates. Thus, unless social overhead capital
emphasis o n imbalances, tensions investment in leading sectors investments provide cheaper or improved services, private investment
created in any economy by making capital
other words, he development of leading sectors in directly productive activities will not be encouraged. In this way, the
of the economy. In
and not the development of all sectors
simultaneously, should be done social overhead capital (SOC) approach to economic development is to
in accordance with the pre-designed strategy for achieving the imbalance the economy_so that subsequent investments in directly
in the underdeveloped countries. Russia and India's productive activities (DPA) are stimulated. In the words of Prof
sustained growth
are the burning examples
of unbalanced growth. Hirschman, "Investment in social overhead capital (SOC) is advocated
development plans not because of its direct effect on final output, but because it permits
UNBALANCEED
EXPLANATION OF THE THEORY OF and in fact invites directly productive activities
(DPA) to come
BY HIRSCHMAN
GROWTH PROPOUNDED in.Social Overhead Capital (SOC) is required as a
pre-requisite of
countries are' nof directly productive activities (DPA)is investment." This sequence of
According to Hirschman, "Underdeveloped to thee investment (from SOC to DPA)
called the Pressure relieving
of developing different sectors simultaneously due investment'
capable The best way to
or
'development via excess capacity of DPA."
paucity of r e s o u r c e s (financial and non-financial).
growth is the investment in leading sectors of the Unbalancing the Economy with Directly Productive Activities (DPA)
achieve economic
with the pre-determined strategy. Such
economy in
investment would
accordance

generate more investment opportunities and would Another wayof creating the imbalance in theeconomy
investment in directly productive activities or DPA at
to make
the first instance. is
the necessary pitch for
economic development. He points out If the investment is first made in directly productive activities or
provide indüstrialised countries has been
on the the shortage of social overhead capital or SOC may raise the cost of
DPA,
that the development of. 'chain of
He regards development a s a production substantially. The rise in cost of production is bound to
pattern of unbalanced growth. alive rather than eliminate thie increase the
disequilibria' that must keep losses are symptoms in a competitve price level as well: The increase in price level may
and uncertainty and unfavourable climate for fresh investment in create
disequilibria, of which profits the ahead directly
to him, "if economy is to be kept moving productive activities or DPA. As a result, the growth process may be
economy. According
is to maintain tensions, disproportions and hampered.To avoid this uncertainty,
political presures may be built up
the task of development policy that leads away from equilibriun1 on the governments to encourage the investment in social
disequilibria. Therefore, the sequence view for each overhead capital or SO
of development from our point of
precisely a n ideai patterninduced fthe political pressiure is effective, the
is by a previous disequilibrium and in tum government may 'take immediate initiative of making investment in
in the sequence "*
move
further move. Unequa Socialoverhead capital or SOC. On the contrary, if it is less
creates a new equilibrium that requires
a
conditions for rapP Then the early initiative may not be taken by the government effective
for
sectors often generates
development of various The promotion of social overhead capital or SOC. As such pressures
growth. and
Capital (SOC
tensions will arise during the course of development. The
with Social Overhead
Unbalancing the Economy Sequence of investment (from DPA to SOC) is called pressure creating
According to Hirschman, "Social Overhead Capital (SOC Vestment" or 'development via shortage of social overhead capital or
with which primary, secondary and tertia
services
SOC'.
implies those basic In basic services a r e includ The Path
productive activities cannot function."
utilities like water, power, irrigatig
to
Development
education, public health, public
drainage, communication, transport etc. The investmentthe on According to Hirschman, there are two paths to development.
The first
creation and eXpansion of such basic services is made by pu path is the sequence (from SOC to DPA) development via
of social welfare and for the encoura excess capacity of SOC and the second path is the sequence (from DPA
agencies for the promotion activities. A to
SoC) development via shortage of SOC. Of the two, he (Hirschman)
ment of directly productive large investment in so
prefers the first path or first ScqucnC which is VIgorousy
Albert O.Hirschman : The Strategy of Economic Development. SEIT-propelling. This can be explained with the help of the diagram
1
:
given ahead:
226 Economics of Development and Planning Theory of Unbalanced Growth 227
Prof. B Higgins firmly believes that whatever path of development
may, be pursued by the planners, each will yield extra dividend of
inducement, easy to take or compelled decisions, resulting in additional
t
investment and output. He further claims that "balanced growth is not.
attainable in most underdeveloped countries, it, may not even be
45°
SoC-DPA desirable. The rate of growth is likely to be faster with chronic
imbalance because of the incentives and pressures it sets up."
Linkage Effects
B
Creating of unbalances is pre-requisite of economic growth
according to Prof Hischman. However, the problem is one of finding
the kind of imbalance that is likely to be most effective. This
necessitates the knowledge of interlinkagesacross different sectorSof
ok45 the economy. Any investment may have both torward linkageand
SOC cOST backward linkageeffects. The former encourages investment_in
subsequentstages of production ánd the latter in carlier stages of
In the above diagram, the units of investment in SOC are development. Here we are explaning both of them as under
measured on OX-axis, and the units of investment in DPA are
measured on OY-axis. The curves a, b, and c are "isoquant". showIng
Forward Linkages. Forward linkages refer to the growth of
certain industries owing to the initial growth of those which supply raw
the various combinations of SOC and DPA. They result in the same material. It encouragesinves+ment in sübsequent stages of production.
gross national product at a given time. As we move successively from Expansion of steel industry, for example, will encourage 1adustries
curve a to curve b, and then from b to curve c, we reach a higher level making steel furniture, automobiles, machines, tools etc. using steel as
of gross nationaB product. In order to give a simple interpretation the their basic input.
curves have been drawn in such a way that their optimal points fall on
the 45° line. This line indeed gives the locus of balanced growth of DPA (i1) Backward Linkages. Growth of a set of industries stimulates
and SOC. the growth of those which supply raw materials. It encourages
In his doctrine of unbalanced growth, Hirschman considers two
investment in earier stages of producion. setting up a steei plant, for
assumptions Firstly, SOC and DPA cannot be developed simu
example, woüld stimuiate the demand for steel scrap, coal and other
taneously, and Secondy, the sequence of expansion should be such tha
related goõds. Production of these_goods wir accordingly increase.
These are backward linkages
may maximise 'induced' decision-making. Study of Forward and Backward linkage facilitates the choice of
is adopted
If the way of development via excess capacity of SOC activities through which growth with imbalances should be generated in
the economy Will proceed on the dotted line AA'BB''C. When the
the system. Industries generating maximum linkages ought to be
developed first. According to Prof. Hirschman, intermediate industries
economyenhances SOC fromA to 4', the inducedthe
is restored at B. At this
DPA accelerates.to
economy is on a Such as of steel and coal
B unul the balance point are expected to generate maximum linkages.
higber level of output. In the same way, higher, gross national produe Lst Industries First
accelerated further to B'', DPA will also be
can be attained if SoC is
shifted to point C via C'. Prof. Hirschman favoured the setting up of last industries first.
On the other hand if the economy follows the sequence o he success of unbalanced growthbestrategy needs a wise selection
projects in which investment is
of
'development via shortage of SoC, the economy_will proceed on the
o made first: For this purpose,a
thick line AB BC'C. When DPA is enhanced to B', SÖCwill have t0 leveloping country may not uudertake the industrial process itself,
shift to A', and then to B. When DPA is increased further to C', the ultaneously, it can import from abroad and assemble for finished
balance requires SOC to increase to C via B"" Droducts. Prof. Hirschman explains it with the help of example. Let
Suppose, two projects named A and B require some capital. A has a
an

It is, thus, important here to

development is more
note the fact that the former
continuous and smooth than
path
the seco
ate of return
erest
at 20
percent and B 15 percent while market rate of
is 16 percent. Market consideration will prefer investment in A
Hirschman calls it "self-propelling". To him, "Development via S
shortage is an instance f the disorderly, compulsive sequence, wn
rst. When project has been started, rate of return B increases to 20
4
ercent and then B can also be safely undertaken be 25 percent. Hence
via excess SOC capacity is essentially permissive, and invites investm spite of loss involved in initial stages, it is more profitable to
i n 'DPA." ndertake project B first, and A later on. Thus it is better to uadertakee

228 Economics of Development and Planning
project B first and A later on.
Backward linkage effects are
combined result of several last stage industries in the country. A
backward linkage cffect is produced by increase in demand. Therefore,
when the demand for import replacing commodities increases, it
justifies domestic last stage production.
Thus when demand reaches a certain threshold it pays to import
the product and when threshold is reached, Hirschman advocates to
give subsidies or protection to import replacing industries. Prof.
Hirschman calls them import enclave industries which have been very
significant backward linkage effects. The underdeveloped country does
not give any importance to the role played by export in the economic
development. They treat them as a step child. Consequently, the
exports do not expand and thereby fail to produce forward linkage
effects within the economy. Keeping these things in view, Hirschman
suggests that the export promotion is the only practical way of
achieving rapid industrialisation via import substitution.
Advantages/Merits
Since the underdeveloped countries face the acute scarcity of
financial resources in particular, the unbalanced growth theory seems
to be highly attractive to them. As such, Prof. Hirschman seems to have
touched the pulse of these countries while stating that it is basically
their own theory leading to the rapid economic development of the less
developed countries.
.
The main advantages of the theory of unbalanced growth are as
follows:
(1) Historical Experience. The past history of the present
developed countries speaks that the economic development of the
Western countries (called developed countries), in particular during
the early stages of the Industrial Revolution, was not a balanced one
but marked by imbalances. Similarly in the United States between
1850-1950, many things have grown, but everything did not grow at the
same rate. According to Prof. Hirschman, "Development has taken
place with growth being communicated from the leading sectors of the
cconomy to the followers, from one industry to another, from one firm
to another." In other words, the growth in these countries has been one
So
of series of disequilibria of these
and corrections disequilibria.
as the pattern of growth of these countries is concerned, it began witn
the production of consumer goods and the manufacturing acuvly
began at a later stage.
(2) More Realistic Theory. According to some leading econo
mists, unbalanced approach is more realistic for development o
underdeveloped countries. Generally these countries have scarcity o
funds and other resources. The theory suggests optimum utilisation o
the scarce resources in underdeveloped countries. The theory
considers various aspects of growth planning. It is rightly
recommended that priority of invesment should be accorded to
sectors of the economy which generate maximum °Linkages'.
229
Theory of Unbalanced Growth
(3) More Important to Basic Industries. The unbalanced growth
theory underlines the significance of basic industries in the process of
the
growth. This will automatically press for the growrth of consumer goods
industries.
(4) Economies of Large-Scale Production. The strategy, of
unbalanced growth generates economies of large-scale production.
Establishing key industries calls for the establishment of ancilaries,
generating all-round increase in income and employment. Also, síze of
the market expands, benefiting all industries simutaneously.
(5) Encouragement to new Inventions. Unbalanced roth
calling for inventios
generates pulls and pressures in
and innovations.
the system, new
(6) Self-reliance. Self-reliance is the undercurrent of the theory of
unbalanced growth for which underdeveloped countries aspire. It starts
with the realistic assumption of chronic scarcity of resources n
underdeveloped countries, and contemplates to initiate and accelerate
the process of growth in accordance with the needs and means of the
country concerned.
(7) Generation of Economic Surplus. The strategy of unbalanced
growth is expected to generate greater surplus in the system. This is
because of its emphasis upon the capital goods industry. This strateg
15 also expected to produce a very strong multiplier effect in tkc system,
stimulating income and employment.
8) Skill Formation. The strategy of unbalanced growth aims at
Tapid development through the expansion of investment in the social
Over-head capital or SOC. Such an investment creates basic facilities,
Le, elementary and technical education, roads, communications
nousing, power, transport, public health etc., which are very essential
for skill formation, and improving the quality of manpower in the
country. It should be remembered that economic development means
capital
Irom the
formation and skill formation and both of these formations
tiow
implementation of unbalance d growth strategy.
9 Short-term Strategy. According to Prof. R. Nurkse, "Balanced
TOwth is a long-term strategy whereas unbalanced growth as given by
rschman is a short-term strategy." The main advantage of this
approach is that the people of the underdeveloped countries can get
far the fruit of their hard labour and effort in a short period. They are not
O tax their patience for long period. Further, the strategy of balanced
rowth requires huge amount of capital which neither the
underdeveloped countries can afford nor it can be easily mobilised.
(10) Maximising Growth. It is argued that unbalanced growth
Srategy helps in maximising growth of the underdeveloped countries,
Which is most essential in view of the scarce resources which these
Countries possess. The strategy does this by executing the projects in a
Squence that maximises their total linkage effects. The strategy takcs
account of the backward and forward linkage effects
those of each project
 230. I Economics of Development and Planning
(wilh the help of input out
and output tables to find the scope for total
cach project. With this information in respect of number of projects,
the strategy involves finding out the projects or industries with the
STeatest linkage effects or for discovering where the strategic
imbalance can be imparted to the economy. It follows that the
investment in case of industries of such strategic importance will
induce the maximum investment in the subsequcnt stage or more than
any other project can do.
(i1) Better Utilisation of Scarce Resources. According to some
cconomists, there are more chances of better utilisation of scarce
resources in unbalanced growth theory as compared to balancéd?
growth theory. Since there is less mal-allocation and less wastage of
resources, the underdeveloped countries are in a position to use the
scarce resources according to their needs and ability.
Conclusion
From the above study we conclude that the ccncept of
unbalanced growth as propounded by Prof. Hirschman is a fine attempt
at pointing out the path to rapid economic growth for undeveloped
countries. It is realistic and considers almost all aspects .of
developrental planning. The various incentives, pressures, obstacles
and resistances to growth are studied in their proper perspective. The
discussion of forward linkage and backward linkage effectstogether
with final stage production is very useful. Hirschman's emphasis on
and substitution further introduces a touch of
export promotion import
realism. He the
is neither in favour
of overall state planning of Soviet
type (at that time) nor does he leave everything on to platform of free
enterprise. He seems to be in favour of a mixed economy where private
and public both sectors exist side by side, under a common economc
basis. of this reasoning that the Indian planners adopted,
plan.It is on
the policy of industrialisation in the second five year plan vith toP
emphasis on-the development of basic and key industries like iron and;
steel industry.
A Critical Appraisal (Demerits)
Despite a number of advantages, theory of unbalanced growth'
the
suffers from several
evident from the following
weaknesses, inconsistencies and inadequacies as
(1) Neglect of Resistances. This theory has neither taken note of
nor provided for the necessary measures to overcome resistanccs to the
course of expansion in activities. According to Paul Streeten "The
theory concentrates on stimulus to expansion and tends to neglect or
minimise resistances caused by unbalanced growth." This resistance
may occur in many ways and in many forms. For example, ther ? may be
large monopoly gains to some in the nsettled situations that the
strategy deliberately creates. This gives rise to the cmergence of vested
interests who are interested in restrictions on output, rather than on
Theory of Unbalanced Growth 231
cxpansion. Further, there may be people who may make mistakes in
these uncertain circumstances associated with imbalances. The
mistakes may result in bad investment and so on.
(2) Lack of Basic Facilities. The success of this strategy lies when
basic facilities like raw material, power supply, transportation,
communication etc. exist in the economy. Lack of such basic facilities is
a major constraint for the successful implementation of this strategy of
unbalanced growth process. However, in underdeveloped countries
these basic facilities are generally not available.
(3) Defeatist Attitude. This concept combines a defeatist attitude
towards the capabilities of underdeveloped economies with completely
unrealistic expectations about their creative abilities, applies equally to
his theory given by Prof. Hirschman. Investment
own as
creates
imbalances which generate pressures in the development process which
are set right by the inducement mechanism.
(4) Emergence of Inflationary Pressures. Another major
limitation of the unbalanced growth theory is the emergence and
development of inflationary pressures within the poor country when
huge amounts of investments are undertaken into the economy at
income will increase which may tend to raise
certaiu strategic points,
demand for consumption goods more than its supply. Shortages appear
due to pressures and strains, ultimately leading to inflationary situation.
(5) Linkage effects. In fact linkage effects are not based on
statistical data pertaining to underdeveloped countries, where social1
overhead facilities are much developed for a generat n or so.
(6) Too much emphasis on Investment Decisions. Prof
Hirschman's theory gives maximum stress on investment decisions
because they play an important role in economic development. Butare
at
the same time administrative, management and policy decisions
cqualy essential for the promotion of economic development.
Where
(7) Lack of Flexibility. Inducement mechanism is practicable
thereit is internal flexibility of resources but in underdeveloped
countries, is difficuit, if not impossible, to shift resources from one
Sector to another.
(8) Neglect of the Degree of Imbalance. According to Paul
Streeten the theory does not explain the degree of imbalance among the
Yarious sectors. While criticising the unbalanced growth theory, he
asks, "The crucial question is not whether to create imbalance, but
What is the optimum degree of imbalance where to imbalance and how
much in order to accelerate growth which are the growing points.
where should the spearhead be thrust, or which slope of snowbails
BTOWs into avaBanches." These questions are of great importance for
development which remain unanswered in the theory of unbalanced
growth. He thus points out that inadequate attention has been paid to
the
composition, direction and timing of unbalanced growth.
232 Growth | 233
Economics of Development and Planning Theory of Unbalanced
AND
(9) Neglect of Agriculture Sector. According to critics, the theory DIFFERENCE BETWEEN BALANCED GROWTH
of unbalanced growth fails to pay due attention to UNBALANCED GROWTH
the backbone of the economy of
agriculture which is
underdeveloped countries. It is an Or
UNBALANCED
open seecret that in over populated and agriculture based under- BALANCED GROWTH STRATEGY Vs.
developed countries neglect of agriculture could be suicidal. Further, GROWTH
shortage of agricultural goods, such as raw material, can emerge as aa Or
serious constraint to the industrialisatíon SIMILARITIES AND DISSIMILARITIES BETWEEN
programme of a country. GROWTH
BALANCED GROWTH AND UNBALANCED
(10) Neglect of Consumer Goods Industries. From the similarities
consumer's point of view, Prof. Hirschman's theory of unbalanced: Both balanced growth and unbalanced growth have
similarities and
growth is a failure becauses it lays undue emphasis on setting up of and dissimilarities. First of all, we shall discuss
capital goods industries at the expense of consumer goods industries. afterwards dissimilarities :

(11) Disadvantages of Localisation. According to critics, the Similarities

the theories lay
experience of different countries indicates that there is the tendency of (1) Emphasis on the Role of Private Sector. Both
market mechanism
concentration of heavy industries at one place on account of external emphasis on the role of the private sector based on
economics. However, it restricts the mobility of factors of production under which they operate.
In turn, it creates the other problems ike slums, overcrowding,
(2) Ignore the Role of Public Sector. Both the theories ignore the
economic development of a country.
sanitation and above all the atmosphere of surrounding localitis. role of public sector in thesector is not coming forward to invest i n
becomes highly polluted. Further, during the period of wars, such
places are the main targets of the enemy. In this context, it has been
However, in case the private
investment
the initial be made the public sector
by
basic industries, may
rightly said, "It is not wise to keep all eggs in one basket." and subsequently all entrepreneurship be left to the private sector.
(12) Neglect of Advancement in Knowledge. Prof. Hirschman's (3) Rapid Economic Development. Both theories aim at rapid
economic development of the econonmy:
approach, according to Prof. S. K. Nath "is about
doing nothing
give rise to external
shortages, bottlenecks and obstacles development, till there are
to (4) External Economies. Both the theories
complaints about them and groupP pressure on public authorities cann economies.
make sense only if we believe that these shortages, bottlenecks and (5) Ignore the Role of Supply Limitations and Supply
the limitations
obstacles to development, once they are felt, can be removed Inelasticities. Both the theories ignore role of supply
instantaneously for if it does take sometime to remove them, then while and supply inelasticities.
the process of removing them is under way, development is hindered." (6) Both are Complementary to Each Other. Both the theories
scarcity,factor
Conclusion are conplementary to each other. Owing to the
unbalanced growth theory may be adopted at the initial stage. When
is switch to the strategy of
Despite the above weaknesses and criticisms, the theory of resource base consoiidated, w e may over
balanced growth.
unbalanced growth plays a significant role in the economic
development, of both underdeveloped and developed countries. It (7) Minimum Scale of Investment. Both the theories accept thee
provides some valuable insights into the development process and basic requirement of adequate minimum scale of investment.
suggests suitable lines of action for the less developed countries. It Dissimilarities
emphasises the development of capital goods industries, generates
The liss nilarities betwe balanced growth and unbalanced
xternal economies and initiates rapid economic growth. Russia was
the first country who adopted it and got success in accelerating the growth are as follows
economic growth, and ranked as the supreme power of the world.
(1) Development of Sectors. The theory of balanced growth aims
Similarly, India followed the same path in its second five year plan. at development of all sectors of the economy simultaneously, whereas
However, the implementation of balanced growth theory in India has
created serious bottlenecks on the energy front plunging the country unbalanced growth theory focusses on the development of key
sectors
of the economy only.
into serious energy crisis.
(2)
Amount The implementation of the balanced
of Investment.
growth theory requires huge amount of investment because all sectors
I 5 . K. Nath: Balanced Growth, Economic Policy for Developmeni. are to be developed simultaneously. On the contrary, thc implcmcn
234 Economics of Development and Planning Theory of Unbalanced Growth 235

tation of unbalanced theory requires less amount of investment because resources, they should adopt the path unbalanced growth of
and othcr
at the
only the leading sectors are to be developed on priority basis. initial stage. As a result of it when demand for capital
balanced growth may be adopted at a
(3) Term of the Strategy. Balanced growth strategy is long-term resources increases, the path of
and balanced strategies are
strategy of development because the development of all sectors of the later slage. In this way, both unbalanced
economy is bound to take long period. On the contrary, the unbalanced needed to take the underdeveloped economy on
a higher level of
economic development requires both
growth is a short-period strategy as the devclopment of few leading economic development. Thus,
sectors of the economy is possible in the short period. unbalanced balanced growth
and strategies. As regards India,
because it is not
(4) Size of the Market. According to balanced growth theory, size unbalanced growth theory is definitely superior all
country like India with
r e s o u r c e s to
limited develop
of the market is the main limitation, but in unbalanced growth, it is the possible for a

lack of decision. sectors of the economy simultaneously.

are available in abundance at
(5) Growth Rates. Under balanced growth, the growth rates are However, if productive r e s o u r c e s will definitely be superior
the initial stage then balanced growth theory
gradual, harmonious and.consistent, whereas under unbalanced
growth, there is disharmony and inconsistency and growth rates are to unbalanced growth theory.
uneven and disorderly. QUESTIONS

(6) Problems of Shortages. Balanced growth considers the Questions

problems of shortages, whereas unbalanced growth takes special Long Answer/ Essay Type
consideration of the shortages. 1. Critically theory of unbalanced growth.
examine the
What are its limitations ?
2. Discuss Hirschman's theory of unbalanced growth.
(7) Complementary Vs: Competitive. Balanced growth believes on stimuli to expansion and tends to neglect or
that industries are complementary to each other whereas unbalanced
3. "The theory concentrates Comment upon it.
minimise resistances caused by unbalanced growth.
growth believes that the industries are competitive. unbalanced growth. Which of the two
4. Compare and contrast balanced and
(8) Spread of Bottlenecks. Under balanced growth theory, you would prfer to the developing country like India.
economical." in the light of this
bottlenecks are'spread in the whole economy which create obstacles in 5. "A poor country cannot afford "to be
the field of development. On the contrary, under balanced growth statement, bring out the common features of baianced and unbalanced
theory, bottlenecks are concentrated in certain regions of the cconomy gTOwth theories.

offer considerable incentives for inventions and innovations. 6. Discuss the balanced and unbalanced growth concepts.
which 7. What is meant by unbalanced growth ? Discuss its merits and demerits.
Which one is the Better Strategy for Deyelopment ? between balanced
8.
Explain the strategy of unbalanced growth. Distinguish
After studying both the strategies i.e, balanced growth and and unbalanced growth strategies.
unbalanced growth, a logical question arises which one is the better 9. Hirschman's doctrine of unbalanced growth. Give also its merits.
Explain
strategy for development ? As a matter of fact, both have merits and 10. Ezamine the economic rationale of the doctrine of unbalanced gaw.
demerits. None is perfect. Both aim at rapid economic development.
The only difference is about the nature of development process Short Answer Type Questions
between balanced growth and unbalanced growth. Which of the
because of shortage of resources there is need of unbalanced growth 1. Distünguish
and two is more suitabl to a country like India ?
because of imperfections of the market there is need for balanced
growth. In this connection, Paul Streeten has rightly said that the raising 2. Explain the concept of unbalanced growth.

of controversy of choice between the theory of balanced and 3. Write a note on Balanced Vs. Upbalanced growth.
unbalanced growth is futile. Both these strategies are complementary 4. Wiat do you understand by unbalanced growth as a strategy for economic
and not competitive. According to Ashok Mathu, "Balanced and development
growth. Which of tbese
unbalanced growth need not be mutually conflicting and an optimum . Distinguish between dalanced and unbalanced
backward
to economic development in a

strategy, of development should combine some elements of baiance as

well as imbalance.'
Would
economy ?
you recommend as a strategy

6. Write a note on linkage effects.

We of
are the
opinion that since underdeveloped countries face
the 7. What is meant by backward linkages ?
problem of acute shortage of financial as well as of non-iinancial 8, Explain the concept of unbalanced growth.
9. Write a note on SOC and DPA.
1 Ashok Mathur: Baianced Vs. Unbalanced Growth. 10. What is meant by development path ?