MPSC 2023 Prelims Paper-I · Question 48 of 100

Correct — option (1). The word doing the work in the stem is 'balanced', and in growth economics it has a precise meaning: an economy is on a balanced growth path when the principal magnitudes that describe it all advance at the same constant rate, so that the ratios between them stay unchanged as the economy expands. Growth that is balanced in that sense does not alter the shape of the economy; it enlarges it while keeping its proportions. The four printed choices are all of the form 'equality between the growth rates of such and such', so the question is asking which set of magnitudes has to be brought into step, and option (1) is the only one that names the economy's own producing and produced quantities together — income, output and the resource base on which both rest. Take the three in turn. Output and income must grow together because they are two readings of the same activity: what an economy produces in a year is what it distributes as incomes in that year, so a growth rate of income that outruns the growth of output is not real growth at all but a rise in prices. The resource base has to be joined to them because it is the constraint that makes the path sustainable rather than merely arithmetically consistent. If income and output climb faster than the natural resources that feed them can be replenished or extended, the extra output is being drawn out of stock rather than from a genuinely larger flow, and the path cannot be held. That is why the three appear in a single option instead of in pairs. The other three choices each drop one of the necessary terms or replace it with population, which is a different question altogether — population enters the discussion of per capita income, not of proportionality between the growing magnitudes of the economy. Option (1) is therefore the answer. Note that the English stem is printed as a lead-in phrase completed by each option and carries no question mark, while the Marathi column prints the same item as a fill-in-the-blank.

• (2)equality between growth rate of income and growth rate of population — This is the most instructive of the wrong answers, because the condition it describes is real but is the opposite of something to aim at. If national income grows at exactly the rate at which population grows, then income per head does not change at all: the economy is producing more, but there are proportionately more people to share it, and the average person is no better off at the end of a decade than at its start. That state of affairs has a name in development economics — the low-level equilibrium trap, in which every gain in income is absorbed by the additional population it makes possible — and escaping it, rather than achieving it, is the object of development policy. A candidate is drawn here by the correct instinct that population matters to growth, but population belongs to the discussion of per capita income, not to the proportionality between the economy's own magnitudes.
• (3)equality between growth rate of natural resources and growth rate of income — This option is a subset of the right answer and fails for what it leaves out rather than for anything false in what it says. Tying income growth to the growth of the resource base is a genuine part of the requirement, but output is missing, and output cannot be dropped without losing the substance of balance. Income and output can in principle diverge — that divergence is what inflation looks like in the national accounts, and it is also what happens when income is sustained by drawing down assets rather than by producing more — so an account of balanced growth that mentions only resources and income leaves the central identity of the national accounts unstated. Where a paper prints a two-term option and a three-term option covering the same ground, the fuller statement is what is being asked for, provided every one of its terms belongs.
• (4)equality between growth rate of natural resources and growth rate of population — This option pairs the two terms that lie outside the economy's productive accounting and omits both income and output, which is to describe something closer to the Malthusian problem than to balanced growth: Malthus was concerned precisely with whether the means of subsistence could keep pace with the growth of numbers. Whatever the merits of that question, it is not the one the stem asks. Balanced growth is about the internal proportions of an economy that is expanding, and an economy whose resources and population happened to grow at the same rate could still have its income and output growing at quite different rates from each other and from both, which is exactly the imbalance the concept is meant to rule out.

Two distinct ideas travel under the word 'balanced' in growth economics and a candidate needs to keep both, because MPSC asks about each. The first is the balanced growth path of growth theory, which is the idea this question tests: a trajectory along which the economy's key magnitudes grow at the same constant rate, so the proportions among them stay fixed and the structure of the economy is preserved as it expands. The second is the balanced growth doctrine of development economics associated with Ragnar Nurkse and Rosenstein-Rodan, which argues that a poor country should invest across many sectors simultaneously rather than concentrating on one, because each new industry creates demand for the products of the others and no single industry can prosper in a market too poor to buy its output. Against this stands the unbalanced growth argument of Albert Hirschman, that a capital-scarce country cannot afford a broad front and should deliberately create imbalances at strategic points, allowing the linkages that those investments generate to pull the rest of the economy along. The two senses are related — both are about proportion between the parts of an economy — but the first is a description of a path and the second is a prescription for investment strategy, and the answer expected depends on which sense the stem is using.

This is one of a group of questions in this paper drawn from a single stretch of the development economics syllabus — balanced growth, Nurkse and the vicious circle of poverty, Schumpeter on development against growth — and they reward being prepared as a connected block rather than as isolated definitions. The Commission's habit in this area is to print options that differ only in which two or three magnitudes they name, so that the candidate cannot rely on recognising a familiar phrase and must instead ask what the concept actually requires. The technique for such an option set is to read the four choices as a list of variables and notice which variables move in and out: here income appears three times, natural resources three times, population twice and output only once, and the single appearance of output is a signal worth examining rather than ignoring, because an account of growth that omits what is produced has left out the central term. A second point of method is that when one option contains all the terms of another and adds a further term that also belongs, the longer option is the one being asked for.

• A balanced growth path is a trajectory on which the principal magnitudes of an economy grow at the same constant rate, so that the ratios between them remain unchanged and the structure of the economy is preserved as it expands.
• Income and output are two readings of the same activity in the national accounts, so growth in income that is not matched by growth in output reflects a rise in prices rather than a real expansion of the economy.
• Growth of income and output that outruns the growth of the resource base is drawn from stock rather than from a larger flow, which is why the resource dimension is included in the condition for balance.
• Equality between the growth rate of income and the growth rate of population leaves per capita income unchanged, the condition described in development economics as a low-level equilibrium trap and something to escape rather than to aim at.
• The balanced growth doctrine of Ragnar Nurkse and Rosenstein-Rodan is a separate idea, arguing for simultaneous investment across many sectors, and it is opposed by Albert Hirschman's case for deliberately unbalanced growth through linkages.

• Reading population into a question about balanced growth, when population belongs to the discussion of per capita income rather than to proportionality among the economy's magnitudes
• Treating equality between income growth and population growth as a policy objective, when it describes a trap in which per capita income never rises
• Choosing a two-term option over a three-term option that contains it, when every term in the longer statement belongs
• Confusing the balanced growth path of growth theory with the balanced growth doctrine of Nurkse, which is a prescription for investment strategy rather than a description of a path

Development economics in MPSC papers is tested mostly through definitions and attributions: what a named concept requires, which economist advanced it, and what the opposing doctrine says. The options are usually built by permuting a small set of magnitudes — income, output, capital, employment, population, resources — so that recognition of a phrase is useless and the candidate has to reason about which magnitudes the concept actually ties together. Balanced and unbalanced growth, the vicious circle of poverty, the big push, and Schumpeter's distinction between growth and development form a compact block that supplies several questions in most papers, and preparing them together is far more efficient than meeting each as an isolated term.

No directly related past PYQ was found.

• practice — not a real PYQ

  If the national income of a country grows at exactly the same rate as its population, which of the following will be the result ?

  • (a)Per capita income will rise steadily
  • (b)Per capita income will remain unchanged
  • (c)Per capita income will fall
  • (d)Per capita income will first rise and then fall

  Answer(b) Per capita income will remain unchanged — the additional income is divided among a proportionately larger number of people, so the average person is no better off however long the process continues. Development economics describes this situation as a low-level equilibrium trap, and escaping it requires income to grow faster than population rather than in step with it.

• practice — not a real PYQ

  The doctrine of balanced growth, which holds that a poor country should invest simultaneously across many sectors so that each creates demand for the products of the others, is associated chiefly with which economist ?

  • (a)Albert Hirschman
  • (b)Ragnar Nurkse
  • (c)J. M. Keynes
  • (d)Alfred Marshall

  Answer(b) Ragnar Nurkse — his account of the vicious circle of poverty led him to argue that the market in a poor country is too small to support any single new industry, so investment must be spread across sectors at once, an argument also made by Rosenstein-Rodan in the form of the big push. Albert Hirschman took the opposing view, that a capital-scarce economy should create deliberate imbalances and let linkages pull the rest of the economy forward.