Question

Thoroughly discuss the strengths of the Unbalanced Growth model. What sectors would you suggest developing countries target to lead the development process today? You can give a specific example in a country of your choice.

Answer 1

The theory of unbalanced growth was developed by Hirschman in 1958. He developed this theory based on the limitations of balanced growth theory. The balanced growth theory suggested that the economy needed simultaneous investment in all the sectors of the economy for sustainable growth whereas the unbalanced growth theory suggested that it is impossible to invest all the sectors simultaneously and suggested that the investment in the selected sectors. This would lead to strengthening another sector in the later stages of growth. The investment in one sector creates a multiplier effect, and it generates induced to invest in another sector.

Here we take an example of India, a developing country in the world. The major debate of India’s unbalanced growth is based on the disparities among the country. It evident that the country has larger income disparities among the states, which means that richer states are growing faster than poor states. This is because of migration and trade existed in the country. As per the various research, it suggested that the country needs unbalanced growth in the infrastructure, urbanization and other possible sectors. It would benefit other sectors in the country.