Big Push Thheory By Prof. Rodan

Big Push Thheory By Prof. Rodan

• 2.
  BASIC IDEA :-The idea behind this theory is this that a big push or a big and comprehensive investment package can be helpful to bring economic development. In other words, a certain minimum amount of resources must be devoted for developmental programs, if the success of programs is required.
• 3.
  This theory isof the view that through 'Bit by Bit' allocation no economy can move on the path of economic development, rather a specific amount of investment is considered something necessary for economic development. Therefore, if so many mutually supporting industries which depend upon each other are started the economies of scale will be reaped. Such external economies which are attained through specific amount of investment will become helpful for economic development.
• 4.
  Prof. Rodan mentionedthree kinds of indivisibilities which are essential to achieve the economic development :- 1) INDIVISIBILITY IN PRODUCTION FUNCTION 2) INDIVISIBILITY OF DEMAND 3) INDIVISIBILITY OF SUPPLY OF SAVINGS
• 5.
  Indivisibilities in theproduction function may be with respect to any of the following: INPUTS OUTPUT PROCESS OF PRODUCTION Law of increasing returns play an important role in reducing the capital output ratio. INDIVISIBILITY INCREASING RETURNS
• 6.
  FOR EG. :-SOCIAL OVERHEAD CAPITAL Requires huge investment. Better utilization will bring down the cost and make them profitable and useful. Cannot be imported. They all contribute to development indirectly. They last for a longer period of time. UNDERDEVELOPED COUNTRIES :- Social overhead capital requires huge investment and underdeveloped countries will have to invest more of their income.
• 7.
  The SOC isattached with the following indivisibilities:- i. INDIVISIBILITY OF TIME ii. INDIVISIBILITY OF DURABILITY iii. INDIVSIBILITY OF LONG GESTATION PERIOD iv. INDIVISIBILITY OF INDUSTRY MIX OF DIFFERENT KINDS OF PUBLIC UTILITIES. SOC must be developed immediately. Isolated facilities will not be beneficial High initial investment in SOC is necessary in order to pave the way for quick yielding directly productive investments.
• 8.
  Two main characteristicsof underdeveloped countries :- a) Small size of market b) Low per capita income Investment in a single industry can be risky as demand is limited in UDC’s According to Rodan, investment should be made in interdependent industries. This reduces the risk as market will be extended. REDUCES THE PURCHASING POWER OF PEOPLE
• 10.
  A specific amountof investment can be made in the presence of specific savings But in case of UDCs because of lower incomes the savings remain low. Therefore, when incomes increase due to increase in investment the MPS must be greater than APS.
• 11.
  Realistic assumptions ofindivisibilities. Examines the path towards equilibrium and not merely conditions at the point of equilibrium. UDC’s realize greater economic from world trade independently of home investment. External economies are completely ignored. Neglects investment in the agricultural sector.
• 12.
  SOC-highly expensive, hashigh capital output ratio and a very long gestation period. This makes the task of developing UDC’s more difficult and longer. Adler’s statistical analysis reveals that low investment pays off well in the form of additional output. Big push is a kind of ‘prescription’ for launching UDC’s on the path of development. It is not a historical explanation of how development takes place.