Covid-afflicted economy needs ‘Unbalanced Growth’

Covid-afflicted economy needs ‘Unbalanced Growth’

Binish Qadri

The balanced-growth model assumes all economic variables growing at a similar rate. On the other hand, the unbalanced-growth model assumes all economic variables growing at a different rate, thereby requiring investment in strategic sectors of the economy rather than simultaneous investments in all the sectors. The argument of linkages is quite simple as rest of the sectors would grow on their own due to ‘‘linkages effect’’. What is required in a pandemic is a more dynamic setting and focus on some strategic sectors alongside the participation of communities. The economy under Covid-19 is characterised by low economic variables such as low per-capita income, low growth rates, low capital formation, low social capital, low social overhead capital (SOC), low directly productive activities (DPA), etc.
Any development under Covid-19 can only take place by unbalancing the economy which is possible by investing more in social overhead capital (SOC) in general and in health and education sector in particular. Health care and education are important merit goods which are judged on the basis of some notion of need, rather than willingness and the ability to pay. These sectors generate productive activities (DPA). Social overhead capital (infrastructure & services) takes account of those basic services without which primary (agriculture), secondary (industry) and tertiary (services) sectors cannot function. Since this pandemic has created huge unemployment, a large investment in SOC is essential to encourage private investment in directly productive activities. Countries during crisis or pandemic situations require cheap or improved services. For that reason, the unbalanced approach to economic development focuses more on merit goods such as health and education, so that investment in directly productive activities is encouraged.
In Jammu and Kashmir, Covid-19 cases are increasing every day. It is a challenge to doctors, planners, economists as well as administrators to tackle the manifold problems associated with this virus, keeping in view our economic backwardness. It is high time to use the unbalanced growth model for an underdeveloped economy because it will focus available resources on types of investment which help to make the economic system more adaptable.

The writer is an ICSSR Doctoral Fellow pursuing PhD in Economics at Department of Economics, Central University of Kashmir.

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