# Balanced and Unbalanced Growth Economic development is a complex process involving not only an increase in national income but also structural transformation, employment generation, technological progress, reduction of poverty and improvement in the standard of living. Developing countries often face serious constraints such as low savings, limited investment, inadequate infrastructure, unemployment, small markets and shortages of skilled labour. Development economists have therefore proposed different strategies to overcome these obstacles. Two important approaches are the theory of Balanced Growth and the theory of Unbalanced Growth. While both seek to accelerate economic development by encouraging investment and overcoming structural bottlenecks, they differ significantly in their understanding of how resources should be allocated and how development should proceed. The theory of Balanced Growth is mainly associated with economists such as Ragnar Nurkse and Paul Rosenstein-Rodan. The central argument of this approach is that developing countries should make simultaneous investments in a wide range of complementary sectors. The objective is to create a mutually supportive expansion of production, income and demand throughout the economy. Ragnar Nurkse explained the problem of the “vicious circle of poverty.” In poor countries, low income leads to low savings; low savings result in low investment; low investment causes low productivity; and low productivity again produces low income. This circular process prevents economic development. According to Nurkse, the vicious circle can be broken through a large-scale and coordinated investment programme covering several sectors simultaneously. The concept of the “balanced” nature of investment is important because investment in one industry creates demand for products produced by other industries. For example, if a country invests only in a textile industry, the purchasing power generated among workers may not be sufficient to create a large market if other industries remain underdeveloped. However, if investment is simultaneously made in food processing, clothing, construction, transport and other consumer-goods industries, workers employed in these sectors become consumers of each other's products. This creates a larger domestic market and encourages further investment. Rosenstein-Rodan similarly argued for a “big push” in developing economies. According to him, isolated investments may fail because individual industries depend upon complementary investments in other industries. A large