Despite being a high saving economy, capital formation may not result in significant increase in output due to
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Answer: D. A high capital-output ratio means a lot of investment is needed to produce one extra unit of output. So even with high savings and investment, output grows slowly. So option D.
Watch for: General development problems sound reasonable, but the question points to the capital-output ratio.
Why the other options are wrong
- A. Wrong because weak administration is not the economic link between capital and output asked here.
- B. Wrong because illiteracy affects productivity but is not the direct reason.
- C. Wrong because population density does not explain the capital–output relationship.
Source to check: NCERT Class 12 'Introductory Macroeconomics'; Harrod-Domar growth model as explained in the Economic Survey glossary
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.