Balanced growth rate aims at

Question

UnlockIAS · Accepted Answer

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.

Why the other options are wrong — (b) 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.  (c) 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.  (d) 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.

Concept: 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.

State PCS 2023 Q48 — Economy PYQ with Answer

State PCS 2023 Q48 — Economy PYQ with Answer