Introduction:
According to Rodan, Nurkse and Lewis, economic
development these economies should make simultaneous investment in all sectors
to achieve balance growth.
A strategy of growth with an equal emphasis on agriculture and industry.
Agricultural development provides the food required and releases labour from
the land to engage in industry. Industrial wealth stimulates markets for
agricultural growth or such is the theory. Unbalanced growth denotes a strategy
which focuses on agriculture or industry alone.
Basis of Theory of Balanced Growth:
- Supply Side: Low Income àLow Savingà Low investment àLow productivityà Low Incomeà----
2. Demand
Side: Low Income àLow Purchasing capacityà Low investment àLow productivityà-------
Explanation of Nurkse’s Theory of Balance Growth:
According to Prof. Nurkse in
the development of underdeveloped countries the greatest obstacle is Vicious
Circle of Poverty. The Vicious Circle shows that income is low in underdeveloped
countries. Because of low income, saving is low. There for investment and
output is low. Low output means low income.
(i)
Complementarity of Demand
(ii)
Intervention by the Government
(iii)
External Economies
(iv)
Accelerated Rate of Growth
Balance among Different Sectors:
Ø Balance
between Human and Physical Capital
Ø Balance
between Domestic Trade and Foreign Trade
Ø Role
of Government in the Balance Growth
Advantage of
Theory of Balanced Growth:
- Large size of Market
- External Economies
- Horizontal Economies
- Vertical Economies
- Better Division of Labour
- Better Use of Capital
- Rapid Rate of Development
- Encouragement of Private Enterprises
- Breaking of Vicious Circle of Poverty
- Encouragement of International Specialization
- Development of Social Overhead Costs
Criticism of Theory of Balanced Growth:
This theory Criticized by Fleming, Singer, Hirschman and
Kurihara.
l Unrealistic
or Ignores Scarcity of Resources
l Ignores
the Need of Planning
l External
Diseconomies
l Development
from Scratch
l Not
a Theory of Development
l Same
Policy for Developed and Underdeveloped countries
l Not
supported by History
l Scarcity
of Factors of Production
l Inflation
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