Rostow identified five stages of economic growth.

Stage 1 Traditional Society - The economy is dominated by subsistence activity. Output is consumed by producers; it is not traded. Trade is barter where goods are exchanged directly for other goods. Agriculture is the most important industry. Production is labour intensive using only limited quantities of capital. Technology is limited, and resource allocation is determined very much by traditional methods of production.

Stage 2 Transitional Stage (Preconditions for Takeoff)
Increased specialization generates surpluses for trading. There is an emergence of a transport infrastructure to support trade. Entrepreneurs emerge as incomes, savings and investment grow. External trade also occurs concentrating on primary products. A strong central government encourages private enterprise.

Stage 3 Take Off
Industrialization increases with workers switching from the agricultural sector to
the manufacturing sector. Growth is concentrated in a few regions of the country and within one or two manufacturing industries. The level of investment reaches over 10% of GNP. People save money.
The economic transitions are accompanied by the evolution of new political and social institutions that support industrialization. The growth is self-sustaining as investment leads to increasing incomes in turn generating more savings to finance further investment.

Stage 4 Drive to Maturity
The economy is diversifying into new areas. Technological innovation is
providing a diverse range of investment opportunities. The economy is producing a wide range of goods and services and there is less reliance on imports. Urbanization increases. Technology is used more widely.

Stage 5 High Mass Consumption
The economy is geared towards mass consumption, and the level of economic activity is very high. Technology is extensively used but its expansion slows. The service sector becomes increasingly dominant. Urbanization is complete. Now, multinationals emerge. Income for large numbers of persons transcends basic food, shelter and clothing. Increased interest in social welfare.


Ecoholics is the largest platform for economics.

Download our app: http://ecoholics.in/mobile-app/

Visit our website for further information and resources: http://ecoholics.in/

To Subscribe for Courses - https://subscription.ecoholics.in/

Reach out to us on Whatsapp for further information: https://wa.me/917880107880

If you’re preparing for competitive exams like UPSC IES, RBI DPER or UGC NET then Ecoholics is the one-stop destination for all your learning needs. Study economics the smart way and get an in-depth understanding of this dynamic subject with our holistic approach. Our team of expert faculties help you polish your knowledge and provides you with one-on-one mentorship and doubt-clearing sessions, so you leave no stone unturned when it comes to your preparation. By signing up with us, you can access our live classes, video lectures, test series and get the hard copy of study material delivered to your doorstep, so your preparation never hits a bump!

Follow our social media handles to stay updated on all things economics.

Follow Ecoholics on Twitter-   / ecoholics_in  
Follow Ecoholics Facebook Group -   / 41907.  .
Follow Ecoholics Facebook Page -   / ecoholics8  
Follow Ecoholics on Instagram:   / ecoholics.in  
Follow Ecoholics on Telegram: https://t.me/ecoholicsbysanat

Become a Member of Largest Community of Economics: https://ecoholics.in/become-a-member/

#economics #growthanddevelopment #economicgrowth #economic #economists #upsc #rbi #indianeconomicsservice #ias #iitjam #gateeconomics #ugcnet #ugc #jrf #economy #unionpublicservicecomission #ignou #dse #jnu #maentrance #pgentrance