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Big Push Theory by Rosenstein Rodan

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 Rosenstein Rodan's Theory of Balanced Growth 






Rosenstein Rodan advocates the "Big Push" theory which empathizes the concept of large comprehensive investment in an underdeveloped/ stagnant economy to boost the 

the cycle of economic activities. 

The theory states that investing in it by bit or piecemeal will not generate enough force that will push the economy to overcome the obstacles. 


The key factor of the theory of Rodan is "indivisibility". 

According to him, the indivisibility of inputs, outputs, or processes leads to increasing returns.

 He considered social overhead capitals such as power transport and communication to have greater indivisibility

features and are indirectly productive and have a long gestation period.

They can not be imported rather than internally generated. Their installation requires a sizeable initial lump of investment.

The social overhead capital is characterized by four indivisibility as follows:

1. It is irreversible in time.

2. It has minimum durability/

3. It has a long gestation period, and 

4. It has an irreducible minimum industry mix of a different kinds of public utility.

The indivisibility characteristics of social head capital are key production processes.

Not only indivisibility in production function of process, but Mr. Rodan also advocated for indivisibility in the demand and supply process to keep the market dynamic and vibrant. 


According to him, unless there is assurance that necessary complementary investment will occur, any single investment is too risky to be undertaken at all. The indivisibility demands required inter dependable industries. 


The other indivisibility which Rodan stressed is "The Supply of Saving."


A high quantum of investment requires a high volume of savings. However, in underdeveloped countries savings are low because of low income. To reduce the gap between income and expenditure, the rate of saving should be created. 

In the word of Rosenstein Rodan, a high minimum quantum of investment requires a high volume of saving which is difficult to achieve in low-income underdeveloped countries. The way out of the vicious circle is to have first an increase in income and to provide mechanisms that assure that savings are higher.

The application of Rosenstein Rodan's big push theory in underdeveloped countries requires balance in three major sector-balance between social overheads (SOCs) and directly productive activities (DPAs); Balance between consumers' goods industries and producers' goods industry: and Oriental and vertical balance within consumer goods sector.  

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