TOPIC

Balanced Growth Theory

PRESENTED BY: Hassan Muhammad

SUBMITIED TO: Dr. Asma Awan

Roll No: M-45

SUBJECT:Development Economics

Windows User
[COMPANY NAME]
Presented by: -
The balanced growth theory can be
explained with the views of:

(a) Rosenstein Rodan and (1943)

(b) Ragnar Nurkse an (1953)

(A)Views of Rosenstein Rodan

In his 1943 article he propounded his theory but not use the name of
balanced growth theory. He stated that Social Marginal is different Private
Marginal Product.

(B) Views of Ragnar Nurkse:

Prof. Nurkse has given a proper explanation of the theory of balanced

growth. He holds that the major obstacle to the development of the
underdeveloped countries is the vicious circle of poverty.

So in order to break the vicious circle of poverty they gave a

balanced growth theory.

Definition: -
Simultaneously investment in multiple sector of the country
together to achieve economic growth and balance in the economy.
Explanation: -
There are some strategies which are given below which
under developed countries can adopt to break this vicious circle of
poverty and and can make great development and progress in their
countries: -

1)Balanced development
There should be balanced development in multiple
sector of the country like agriculture industry and services sector,
Because these all sectors are link with beach if agriculture industry
promoted by the government than service sector should also
enhance because to transport agriculture production to the market
or industry there should be roads and efficient transport system
and similarly in industry sector there must be up to the mark
machinery and skilled labor to use that raw material and make
quality goods which create their demand not only in the country
but also outside the country.
2)Investment in lagging sector
Second there should be investment in lagging sector to
bring them equal to leading sector. Its mean government more
focus towards lagging industries and encourage people to invest in
under developed sector to make them develop.

3)balance between consumer and capital

goods industries
Another step is that there should balance in consumer
goods industries and capital goods industries, because if we
consuming more then we should increase our capital to produce
more to meet the demand of the people so that’s why balance is
necessary in both industries to make progress.
4)Balance between SOC and EOC
Here SOC mean (Social head over capital) and ECO
mean Economic head over capital both are different SOC mean to
social welfare like to build roads hospitals and schools while ECO
to improve infrastructure like buildings telecommunication system
and power transmission so there should be balance in them to
achieve growth and development.
5)Balance between domestic and foreign
sector
Last step which should be taken by UDC is they must
keep balance in domestic and foreign sector because if there is no
balance then MNC can make considerable profit from that
country and will send back to their headquarter country and there
will be no benefit to UDC where these MNC located so government
also enhance domestic sector to produce quality goods which beat
the foreign good and maintain an equilibrium to ensure growth and
development.

Balanced Growth Theory of

Economic Development
(Criticisms)
1. Wrong Assumptions:
Prof. Singer argues that the doctrine of balanced growth is based on
wrong assumptions If simultaneous investments are made in all
related fields, bottlenecks arise, due to the shortage of raw materials,
prices, factor shortages etc.

2. Administrative Difficulties:
The principle of balanced growth overlooks the inefficient
administrative capacity of underdeveloped countries. The
administrative machinery is overloaded which causes maladjustment
in the smooth functioning of the economy.

3. Danger of inflation:
Balanced growth doctrine advocates simultaneous investment in a
number of industries. As such when demand increases owing to huge
investment outlays made in different sectors and corresponding
supply fails to cope up with it, resulting in inflation. Thus, under these
inflationary situations, balanced growth fails to deliver fruitful results.

4. More Suitable to Advanced Countries:

Balanced growth theory is more suitable to the well advanced
countries as these countries possess sufficient resources, machines
and entrepreneurs. Thus, underdeveloped economies are not safer for
balanced development on account of scarcity of basic pre-requisites
and infrastructures.

5. Deficiency of Capital:
ADVERTISEMENTS:

In the path of balanced growth huge amount of capital investment is

required. While UDCs cannot afford such heavy capital due to low
savings and market imperfections etc. Thus, the doctrine of balanced
growth becomes an exercise in futility.

Thank you!