Consider the following statements about incremental capital-output ratio (ICOR): 1. ICOR for an economy refers to the units of capital needed to drive one unit of growth. 2. India’s ICOR is about 3.5, which translates to a capital investment requirement of 30% of GDP.Which of the statements given above is/are correct? |ForumIAS

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A

Notes:

India has set an ambitious target to grow GDP at 9% per annum and for this capital investment is needed to drive economic growth.

The incremental capital-output ratio (ICOR) for an economy refers to the units of capital needed to drive one unit of growth.
India’s ICOR is about 4.5, which translates to a capital investment requirement of 40% of GDP. Further, India’s domestic savings rate hovers at around 28% of GDP (World Bank).

Source: 9 PM Compilation of July, 2021