Theory Of Big Push Final 6a6w5l

Theory Of

Big Push

Introduction Problem of capital formulation is widely recognized as the principal bottleneck in the process of growth in less developed countries.

Two theories deserved special mention in this regard :

1. Theory of Big push

2. Theory of critical Effort

Theory of Big push Was pronounced by a notable economist, Rosenstein Rodan, in his Pioneer work “Notes of the Theory of Big Push”. A strategy to emancipate the less developed countries from clutches of vicious circle of poverty

Refers to the strategy of injecting into systems such as lump sum investment that breaks the shackles of economic pessimism Offers private investors enough of investment opportunities with high rates of profit

According to the theory, there ought to be a critical minimum size of growth programme so that the constraints of indivisibilities and discontinuities in the system are effectively overcome

Need of Big Push 1. Indivisibility in the Production Function or in the Supply of Social Overhead Coasts a) b) c)

Time process involving long gestation lag before investment actually become productive Heavy mechanization, involving huge investment expenditure over years Interdependences between various types of infrastructural projects

2. Indivisibility of Demand This refers to interdependences of different industries as regards the demand for their products

3. Indivisibility of supply of saving A critical minimum investment in the of Big Push calls for a critical minimum saving Potential in the system. Large saving are possible only when the size of income is large.

Implications Prof. Rodan

“A Big Push seems to be required to jump over the economic obstacles to development An atmosphere of development may only

Prof. Myrdal

States that backwardness and poverty are impediments to generating sufficient resources for any development programme in less developed countries

Basis of the Big Push Theory External economies are the principal basis of the theory of Big push External economies act as a catalytic agent in the process of growth.

Prof. Rodan

states that „stressing the externalities‟ is what separates the theory growth from a Static Theory

Scitovosky “External Economies mean services rendered free by one producer to the other”

Features of Theory of Big Push 1. Massive Investment The theory investigates massive investment at the very outset of the process of growth

2. Investment in Different Sectors The theory stresses the need for investment across different channels of growth

3. Planned Industrialization The theory underlines the need for planned industrialization of less developed countries.

Criticism JacobViner,Horward and Edler have criticized the theory of big push

1. Impractical 2. Less Increase in Production

3. Neglect Of agriculture 4. More Production from Less Investment

5. Not a historical Fact 6. Inflationary

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Submitted By Kamana, Nancy Anu, Ruchi Guided by Ms Poonam Arora