The theory of big push is a modern version of an old idea of external economies’. It is better that the idea of external economies can be illustrated with the help of an example.
Suppose, there are two industries A and B. If industry A expands in order to overcome the technical divisibility’s, it shall derive certain internal economies.
It results in lowering the price for the product of industry A. If A’s output is used as input for industry B, the profit of A’s internal economies shall be passed on to B in the form of pecuniary external economics. Thus, “the profits of industry B created by the lower prices of factor A, will call for investment and expansion in industry B, one result of which will be an increase in industry B’s demand for industry A’s product. This, in turn, will give rise to profits and call for further investment and expansion of industry A”. Therefore, external economies and indivisibilities flowing are significant determinants of economic development in an economy.
The theory is based on the assumption that an industrial economy enjoys large many external economies. To enjoy these economies, a massive investment is necessary in the development of several industries at the same time.
Main Features of the Theory of Big Push:
The principal features of the theory of Big Push are given below:
1. Massive Investment:
The theory of big push envisages massive investment at the very outset of the process of growth. In its absence, the process of growth may not be self-sustaining.
2. Investment in Different Sectors:
The theory envisages the need for investment across different channels of growth so that each channel sustains the growth of other by providing the necessary demand-base. Thus, it leads towards the Balanced Growth of the system.
3. Planned Industrialisation:
The theory stresses the need for planned industrialisation of under developed countries where agriculture is the dominant sector which is backward and riddled with poverty. A big-push to industrialisation is expected to place the system on sound footing, staving-off the uncertainties of agricultural production.