12 Advantages of the Unbalanced Growth Theory

The doctrine of unbalanced growth represents a unique and splendid contribution in accelerating the rate of economic development in backward and underdeveloped countries.

This theory has tried to touch the impulses of those countries who have the paucity of funds.

Thus, this approach seems to be the right choice, as it yields the following advantages:

1. Skill Formation:

The pivotal importance of the strategy of unbalanced growth is that it points out the rapid development through the expansion of investment in SOC. Therefore, investment should be made on basic facilities like education, roads railway, communications, dams, housing etc. which are pre-requisites for skill formation. This, in turn, helps to improve the qualities of man power.

2. Self-Reliance:

The underdeveloped and less developed countries aspire the achieve self-reliance in the short-run period. For attaining this goal, the essential condition is the development of leading sectors which accelerate the high rate of capital investment. This is only possible through the strategy of unbalanced growth.

3. Short-term Strategy:

Prof. Nurkse’s balanced growth is termed as long-term strategy while unbalanced growth given by Prof. Hirschman is short-term phenomenon. By making deliberate investment in leading sectors, people of underdeveloped countries get fruit of their labour. They have no patience to wait for a long period. Therefore, in comparison, strategy of unbalanced growth is more suitable for the development of underdeveloped countries.

4. More Practical:

The unbalanced growth provides practical utility for the planners. The theory stresses upon the creation of those industries which have maximum total linkage. For instance, according to Hirschman, iron and steel industry is the prime which shows maximum total linkage. This implies that iron and steel industry should be given top priority in the allocation of investment.

5. External Economies:

Unbalanced growth promotes the external economies as it puts more emphasis on heavy industries. Setting up of heavy industries first will build a strong capital base necessary for economic development and will also lead to faster rate of growth. For example, coal and power industries not only accelerate the iron and steel industries but are also helpful in the development of iron and steel industry. This type of interdependence of industries helps in increasing the horizontal external economies. The technique of unbalanced growth in a true sense is the generator of external economics.

6. Economic Surplus:

The technique of unbalanced growth aims at the establishment of capital goods industries which in turn help in the development of subsidiary industries. Income, output, employment expands with the result higher economic surplus is generated. The reinvestment process of surplus creates ripples in the stream of economic growth in a country.

7. More Realistic Theory:

According to some economists, unbalanced growth approach is more realistic for the development of underdeveloped countries. Generally, these countries have scarcity of funds and other resources. They are more intended to develop within their limited means. In such a situation, unbalanced growth has more realistic outlook than the balanced growth approach.

8. Better-Use of Resources:

Another advantage of unbalanced growth is that there are more chances of better use of resources. There is less misallocation and less wastage of resources. Such a country makes use of its resources according to its needs and ability. In this regard, unbalanced growth is better to its counter partner i.e., balanced growth.

9. Advantages of Specialization:

Unbalanced growth policy is based on the concept of comparative cost. Its, fruits are possible out of specialization. This version emphasizes that development can take place through maladjustments, disequilibrium and imbalances only. Therefore, making more investment in such sectors leads to the development of specific industries. Thus, unbalanced growth induces more development activities in a country.

10. More important to Basic Industries:

The unbalanced growth theory underlines the significance of basic industries in the process of growth. This will automatically press for the growth of consumer goods industries.

11. Encouragement to new Inventions:

Unbalanced growth generates pulls and pressures in the system, calling for new inventions and innovations.

12. Maximizing Growth:

It is argued that unbalanced growth strategy helps in maximizing growth of the underdeveloped countries, which is most essential in view of the scarce resources which these countries possess. The strategy does this by executing the projects in a sequence that maximizes their total linkage effects. The strategy takes account of the backward and forward linkage effects of each project. Thus, this strategy helps to find out the projects or Industries with great linkage effect on the economy.