Balanced versus unbalanced growth
Topic: Economic Growth Theories and Business Cycles · NCERT: Beyond NCERT
Meaning
This is a classic debate on how a poor country should use its scarce capital.
- Balanced growth (Nurkse, Rosenstein-Rodan): invest across many complementary sectors at once so that each creates demand for the others. Weakness: it needs huge resources.
- Unbalanced growth (Hirschman, 1958): invest in a few key sectors with strong backward and forward linkages. The shortages and bottlenecks this creates will push investment into other sectors. Weakness: the bottlenecks can last.
Example
India's Second Five Year Plan (1956), based on the Mahalanobis strategy, gave priority to heavy industry. It was an unbalanced-growth choice: build steel, machines and power first, and let other sectors follow.
Don't confuse with
- Who proposed what: unbalanced growth is Hirschman's idea, not Nurkse's. This is a common exam trap.
Related concepts
- Big push theory
- Balanced growth theory
- Unbalanced growth theory
- Backward and forward linkages
- Low-level equilibrium trap
- Rostow's stages of economic growth
- Growth pole theory
- Cumulative causation