UPSC IAS - 2013

Economic growth in country X will necessarily have to occur if:

Year Asked: 2013

A
there is technical progress in the world economy
B
there is population growth in X
C
there is capital formation in X
D
the volume of trade grows in the world economy

Correct Answer

C. there is capital formation in X

Detailed Explanation

The correct answer is C. Capital formation in X is the only condition here that brings growth within the country's own control. Growth means a rise in real output, and output comes from more or better inputs. Net investment adds to the capital stock, and in the Harrod-Domar and Solow frameworks, that accumulation is what drives output growth in an economy.

  • A is wrong. Technical progress in the world economy does not automatically reach X. Diffusion depends on domestic absorptive capacity, such as skills, institutions and investment.
  • B is wrong. Population growth adds labour but does not guarantee growth. It can lower per capita income if capital and productivity do not keep pace.
  • D is wrong. Growth in world trade volume does not mean X gains from it. Terms of trade, export capacity and domestic policy decide that.

This links to the Economic Development and Indian Economy sections of the syllabus. For Mains, it helps in discussing why India's savings and investment rates matter, and why the Solow model says growth must be sustained by capital deepening and productivity.

Trap: aspirants pick A or D because global developments sound like growth drivers. The question asks what must happen within X, so only domestic capital formation fits.

This question appeared in UPSC Prelims 2013 GS Paper-1.

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