1995 General Studies, all questions
UPSC Prelims 1995 · General Studies
Question 93: Economy and Social Development
The main reason for low growth rate in India, in spite of high rate of savings and capital formation is
ahigh birth rate
blow level of foreign aid
clow capital / output ratio
dhigh capital / output ratio
AnswerThe answer is (d).
The capital-output ratio shows how much capital is needed to produce one unit of output. A high ratio means a lot of capital is needed for each extra unit of output, so even a high rate of saving and investment gives only a modest growth rate. Remember: a high capital-output ratio means low efficiency of investment, hence low growth.
Why each option is right or wrong
- (a) High birth rate holds down income per person, but the question points to the efficiency of capital.
- (b) Low foreign aid is not the main reason, since investment is financed mostly from domestic savings.
- (c) A low capital-output ratio would raise growth, not lower it.
- (d) Right: a high ratio.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 1995, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.