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Theory of Balanced & Unbalanced Growth
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THEORY OF BALANCEDAND UNBALANCED
GROWTH
According to the theory of balanced growth, to
achieve the goal of economic development
simultaneous investment should be made in
different sectors of the economy so that a balance
is achieved.
To get rid of the vicious circle of poverty, UDCs
need investment on a large scale.
There is a difference of opinion among economists
about the strategy of investment.
Fredrick List was the first to put forward the theory
of balanced growth. According to him, a balance
could be established among agriculture, industries
and trade. •
In the year 1928, Arthur Young gave the concept
that different industries were mutually
interdependent, and then all of them should be
developed simultaneously
Economists like Rodan, Nurkse and Lewis are of
the view that for their economic development, these
economies should make simultaneous investment
in all sectors to achieve balanced growth.
, According to Lewis, "Balanced growth means that all
sectors of the economy should grow simultaneously so
as to keep a proper balance between industry and
agriculture, and between production for home
consumption and production for exports. The truth is that
all sectors should be expanded simultaneously."
According to Higgins, ‘Balanced Growth implies
simultaneous capital investment in a number of different
industries.
Basis Of The Theory Of Balanced Growth:-
The concept of balanced growth states that the
economic development of the country is possible only
when both the demand and supply sides are developed
simultaneously.
i) Supply Side:-
National supply is low in a UDC.
It is so because due to low income in these
countries there is low Savings.
Because of low saving, there is low investment and
hence, low productivity.
It is because of low productivity that income is also
low.
Hence, in order to increase the supply it is
necessary to increase the investment.
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