This Presentation is about Prof. Paul N. Rosenstein Rodan's Big Push theory.

1. The Big Push Theory
By Prof. Paul N. Rosenstein Rodan
10/31/2014 ANJALI SINGH

2. Introduction
 It is based on the principle of big push
or by the way of big investment for
development in an UDC.
 Investment below a certain level will
be a mere wastage and will not enable
the economy to break the vicious
circle of poverty.
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3. Explanation
Prof. R. Rodan has mentioned three kinds
of indivisibilities which are considered
foremost in getting the path of economic
development :
 Indivisibility in production function
 Indivisibility in demand
 Indivisibility in Supp10l/3y1/2 0o14f ASNJAaLI vSINiGnHgs

4. 1. Indivisibility in Production
Function
 It refers to the indivisibilities of input,
output, process of production etc.
 These indivisibilities lead to increasing
returns ( i.e., increase in output
income employment) and lowers
capital output ratio.
 The most important instance of this
indivisibility is Social Over head
capital.
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5. Social Overhead Capital
 It includes the production of power,
transport, communication and public utility
services with heavy amount of investment
on directly productive activities.
 Their installation requires a ‘sizeable initial
lump’ of investment, but as time passes,
better utilization brings down cost and
makes it profitable.
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6. Indivisibilities of creating SOCs
 Indivisibility of time: SOC is irreversible in
time as it has to be provided before
setting up directly productive industries.
 Indivisibility of durability: SO lasts for long
period, less capital not beneficial.
 Indivisibility of long gestation period:
 Investment of an irreducible industry mix
of public utilities: SOs must be developed
immediately. Isolated facilities will not be
beneficial.
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7. 2. Indivisibility in Demand
 The central idea of Rodan in this regard
is that UDCs have small sized markets
due to low per capita income and low
purchasing power of general mass of
people.
 It can be taken care of by expanding the
size of the market and development of
the complementary industries together.
 Example of Shoe factory.
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8. Indivisibility in Supply of
Savings
 Substantial investment in a no. of
industries at one and the same time
requires a very high level of savings,
which is very difficult to achieve in an
UDC.
 Solution to this is, when income is
increased due to increase in
investment mechanisms must be
provided to raise the marginal rate of
saving in comparison to average rate
of savings. 10/31/2014 ANJALI SINGH

9. Criticisms
 High minimum quantum Investment is not
explained, and also, the capacity of UDCs
to invest is absent.
 There are no specific measures to
overcome bottlenecks
 He doesn’t give importance to PPP
Model.
 He doesn’t give much importance to
technology.
 It fails to recognize that the amount of
resources in UDCs is limited.
10/31/2014 ANJALI SINGH

10. Criticisms
 It is a program of comprehensive
industrialization, agriculture gets no
mention.
 It lays too much emphasis on the
indivisibilities.
 There is a danger of inflation.
 This theory can not be adopted without
active state participation guidance and
control. But, in UDCs the Govt.
administration in very much inefficient,
inexperienced and lethargic to handle.
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11. Theory not supported by History
 As noted by Furtado, the theory is not
confirmed by historical facts.
 Ex. BOLIVIA, where large investments
were spent on social overheads yet
the economy remained stationary and
per capita income also remained low.
10/31/2014 ANJALI SINGH