15 Benefits of Balanced Growth – Explained!

The benefits of balanced growth can be briefly stated below:

1. Balanced Regional Development:

This theory implies that all sectors should be developed simultaneously. No sector should be discriminated in the matter of development.

If planning authorities take the decisions to develop all sectors, it will imbibe the wave of around balanced regional development.

In fact, efficiency, self-sufficiency and self-reliance is the result of balanced growth doctrine. In a sense, balanced growth is the real salvation to the problem of underdeveloped countries.

2. Division of Labour:

A wide extent of market will pave the way for more division of labour and specialization which will raise the productivity and leads to improve the quality of product. By promoting export, it helps to earn foreign exchange. Balanced growth strategy is a tool to encourage it.

3. Specialization:

The balanced growth strategy helps in enlarging the size of the market. The expansion of the market leads to number of benefits. It leads to specialization, the efficiency goes up due to expertise. As a result new innovations are encouraged. There is not only an increase in the quantity of output but there is also better quality of the products. Thus, balanced growth, through specialization helps improving both the quantity and quality of the output.

According to Nurkse, in the long-run, international specialization depend on the size of the market. It is through balanced growth that the size of the market can be expanded due to which productivity goes up. This will also lead to the increase in the productivity due to which all the nations would stand to gain.

4. Possibilities of Innovations and Research:

This theory encourages innovations and researches in different fields of the economy. The competition arises due to the simultaneous development of different industries. The industries which are unable to produce qualitative products, cannot stand in competition with other competitive industries and they automatically shut down their production.

With the result, only efficient and optimum firms remain in the market while others will exit the market. In the modern scientific world, innovations and researches are very conducive for technical progress as they lower the cost of production.

5. Creation of Social Overhead Capital:

Balanced growth is a tool for the creation of social overhead capital. When different industries develop simultaneously, the investment it is made in other social overhead works as of transportation, power jams, banking etc. This further encourages investment in human capital and material capital, which is the fundamental principle of balanced growth.

6. Wide Extent of Market:

Generally, market imperfections and vicious circle of poverty obstruct the path of economic development. This problem can be solved by adopting the principle of balanced growth. The simultaneous development of different sectors help in the production of variety of goods, which in turn, would lead to the expansion of demand and enlargement of the market. Thus, it helps to breech the vicious circle of poverty and market imperfections.

7. Better Use of Natural Resources:

Balanced growth makes the possibility of better use of natural resources in a region. As it has been observed that there are abundant natural resources in underdeveloped countries which remain unutilized or under-utilized. Thus, balanced growth doctrine provides basic facilities for its better use and allocation.

8. Less Dependence on Foreign Countries:

Most of the underdeveloped countries are dependent on foreign countries even for necessities of life because they fail to adopt balanced strategy. The principle of balanced growth leads to enlarge the extent of the market and external economies. It also helps to create social overheads. As a result, there is less dependence on foreign countries.

9. Regional Balanced Growth:

Under balanced growth since different industries develop simultaneously, the chronic problems of underdeveloped countries can be solved only by making investment in different sectors at the same time. These countries can developed cottage and small scale industries, large scale industries, means of transport and communication, agriculture, trade etc. at one time. The plans can be formulated to develop all the regions of the country by making investment in all the regions. This can be possible only through balanced growth.

10. External Economies of Scale:

It is balanced growth which helps in generating external economies. These economies accrue because of the increase in industries and expansion of market. In other words, external economies are those which are received by new industries over the old industries. One industry has the demand for products of other industries. For instance, if a cycle industry is set up, there is also demand for iron and rubber. As iron and rubber industries were already is existence, so cycle-industry can easily get iron and rubber.

These economies are of two types:

(a) Horizontal Economies:

These economies accrue when consumer goods industries are set up. With the setting up of some consumer goods industries, setting up of other consumer goods industries is possible. The setting up of different industries enlarge the size of the market. These economies are called horizontal economies.

(b) Vertical Economies:

These economies accrue when basic industries are set up at the first instance. These lead to development of some less important industries automatically. These economies are called vertical economies.

11. Encouragement of private enterprises:

Ragnar Nurkse, in his doctrine of balanced growth has stressed on the importance of private investment. When investment is made in different sectors of the economy, there would be increase in the importance of private entrepreneurs. He asserts, that the private entrepreneurs can contribute considerably to economic development.

But from this, we should not conclude that the public investment has been ignored. In reality, balanced growth can be materialized only if government directly participates in productive activity. If the social overhead capital is spread over, then the remaining role should be played by private entrepreneurs.

12. Breaking of Vicious Circle of Poverty:

Balanced Growth Theory has laid emphasis on simultaneous investment in both the sectors, i.e., agricultural and industrial. It leads to the development of both agriculture and industry. Development of both the sectors brings- prosperity in the economy. Prosperity is responsible for breaking of vicious circle of poverty. According to Nurkse, “If there is balanced growth of the economy, it will help in breaking the vicious circle of poverty.”

13. Helpful in Getting over the Difficulty of Small Market:

The balanced growth theory is helpful in getting over the difficulty of small market in those countries where mass poverty prevails. Such an approach suggests how, in any scheme of development, a balanced growth can overcome the hurdle of the lack of market or demand. According to Nurkse, “Balanced Growth Theory assists in increasing demand and supply and widening of the market.”

14. Self-Reliance and Economic Stability:

The process of balanced growth involves a number of simultaneous activities, e.g., economic planning, division of labour, specialization, productivity criteria of efficiency, increase in national income and simultaneously increase in demand for goods and services, intersectoral balances, interregional balances etc. Hence there is no scope for wide economic fluctuations. This process implies a self-generating economy due to less dependence on foreigners. Thus, underdeveloped countries depend on foreigners even for their basic necessities.

15. Better Utilisation of Capital:

Balanced growth theory requires proper balance between investment in industry and agriculture. As a result of it, economic development of a country is accelerated. It encourages savings which turn into capital and thereby investment. In this way, it leads to better utilisation of capital.