1. UNBALANCED GROWTH STRATEGY
Introduction
Concept of Unbalanced Growth
Process of Development
Hirschman’s Strategy
Critical Evaluation
References

2. Concept of Unbalanced Growth
What is balanced and unbalanced growth…..?
Investment should be made in selected sectors rather than simultaneous investment in all sectors of the economy.
“Investment in one sector would generate external economies, and these economies can be used by other sector/s and generate external economies, and these economies will be used by some other sectors of the economy”.
In this way, economy gradually moves from the path of unbalanced growth to that of balanced growth.
Economist such as, H.W Singer, C.P. Kindleberger, Paul Streeten, W.W. Rastow have expressed their views in favour of it.
However, it is Prof. Hirschman who has propounded the strategy of unbalanced growth in systematic manner.

3. Hirschman’s Strategy
The term UB has been properly known as Hirschman’s strategy. His main argument is that deliberate unbalancing the economy is the best way to achieve economic growth.
Growth of one sector leads to growth of another.
Prof. Hirschman regards development as a chain of “disequilibria” that must keep alive rather than eliminate it.
If the economy of the developing countries is to be kept moving ahead, the development policy should maintain tensions, disproportions & disequilibria.
This kind of “ see-saw advance” is induced by one disequilibrium & leads to another disequilibrium & so on, it continuous until balanced growth is reached.

4. Hirschman States:
When new investment projects are started, they make use of external economies created by previous investment projects and they create new ones.
There are two types of investment projects.
Convergent series of Investment (DPA)
Divergent series of investment (SOC)
Unbalancing the Economy with SOC
-Investment in social overhead capital first
-Creating excess capacity in SOC and shortage of DPA
Unbalancing the Economy with DPA
-Investment in DPA first
-Creating excess capacity in DPA and shortage of SOC

5. Process of Development
The process of development is based on two important assumptions:
1) SOC & DPA cannot be expanded simultaneously.
2) The path to development can be adopted which produce more and more external economies & induced investment
According to him there are two paths.
The First sequence is (from SOC to DPA) development Via excess capacity of SOC
The Second sequence is (from DPA to SOC) development via shortage of SOC.
But which sequence should be followed first for economic development?
Hirschman preference: the investment sequence which vigorously self-propelling- SOC.

6. Strategy of Unbalanced Growth
DPA Cost
45 DPA=SOC D’ C’ B’ D C
C’’ d B
B’’ c A A’ b a O
SOC cost

7. Backward and Forward Linkages
The next question is to find out the kind of imbalance that is likely to be most effective.
Any investment projected associated with forward & backward linkages effects.
Forward linkages
Investment in a particular stage of production encourages investment in a subsequent stage of production.
For instance, Investment in agro-processing industries
Backward Linkages
Any investment project in one particular stage of production encourages investment in a previous stage of production.
For instance, Investment in manufacturing and provision of agricultural inputs
Now, the development policy should aim at discovering investment projects which produce largest total linkages.

8. Investment in Final Stage of Production
According Hirschman, Industrialization can start only with industries that deliver “final demand”. Therefore, he advocates the establishing of “last stage industries first”. No further intermediate market tends to exist.
While producing industrial goods, a developing country need not to undertake all the stages of production simultaneously.
E. g Automobile or Tractor.
Therefore, final product should be import-replacing commodity. Hirschman calls last stage industries as “Import enclave industries”: These are different form export enclave industries.

9. Critical Evaluation
In adequate attention to the composition, direction and timing of the unbalanced growth:
Negligence of primary sector
Emergency of inflationary pressure
In the market-driven economy, it has limited use
Lack of factor mobility across the sectors
Linkage effects not based on empirical data
Uncertain outcome:
Investment decision based several factors

10. Significance of Theory:
The strategy emphasis on the need to concentrate on a few investment projects
Stressed the role of entrepreneurship
It provides powerful basis for industrialization
References
M.L. Jinghan : The Economic of Development & Planning.
M. Agarwal & Kundanalal : Economics of Development & Planning.
O.S. Shrivastva : Theories & Modes of Economic Development & Growth.
B. Higgins : Economic Development.