Unbalanced Growth Part 2: Path of Development, Expansion of SOC and DPA

Dr. Manishika Jain- Join online Paper 1 intensive course. Includes tests and expected questions.

Path of Development

Expansion of SOC

Path of development will be A B C
Investment in SOC increases from A to – investment in DPA also increases from A to and balance restored at B.
Similarly, investment in SOC increases from B to – investment in DPA also increases from B to and balance restored at C.
This path of development is known as development via excess capacity of SOC.

Expansion of DPA

Path of development will be A B C
Investment in DPA increases from A to – investment in SOC also increases from A to and balance restored at B
Similarly, investment in DPA increases from B to – investment in DPA also increases from B to and balance restored at C
This path of development is known as development via shortage of SOC.

Which Path is Better?

Path of development via excess capacity of SOC (A B C) is more continuous and smoother, as denoted by smooth line in the figure.
Path of development via shortage of SOC (A B C) is discontinuous and not smooth, as denoted by the dotted line in the figure.
Therefore, the first path of development is preferred.

Linkages

Linkage Effects

Forward Linkage Effects

Investment which encourages investment in subsequent or later stages of economic production
Examples – Investment in iron and steel industries will encourage investment in steel furniture industries, etc

Backward Linkages

Type of investment which encourages investment in earlier stages of production
For example – Investment in iron and steel industries may induce investment in coal industries, etc.

MCQs

Q 1 – Investment projects which encourage investment in subsequent stages of production are known as:

a) Backward linkages

b) Sideway linkages

c) Forward linkages

d) Subsequent linkages

Ans – c) Forward linkages

Q 2 – Which path of development is better or more efficient for underdeveloped or less developed countries?

a) Development via excess capacity of SOC

b) Development via excess capacity of DPA

c) Development via shortage of DPA

d) Development via shortage of SOC

Ans – a) Development via excess capacity of SOC

Q 3 – Consider the following diagram and answer the questions given below:

1) Which path of development is via excess capacity of SOC?

a) A B C

b) A B C R

c) A B C

d) R C B A

Ans – c) A B C

2) What is the 45-degree line R called as?

a) Line of equality

b) Line of division

c) Lorenz Curve

d) None of the above

Ans – a) Line of equality

3) Which of the following are the optimal points in the figure given?

a) A, A1 and B2

b) A, B! And C1

c) Only R

d) A, B and C

Ans – d) A, B and C

Q 4 – Investment should be made in those industries which yield ______ total linkage. Fill in the blank with the appropriate answer :

a) Minimum

b) Same

c) Maximum

d) No

Ans – c) Maximum

#ugc

#net

#economics

#unbalancedgrowth

-Manishika