Economic growth in country X will necessarily have to occur if:
Answer & explanation
Answer: (c) there is capital formation in X
Capital formation in X is the answer. Economic growth means a rise in a country's real national income, and that comes from expanding its productive capacity. Capital formation in X is a net addition to X's own capital stock, so it directly enlarges what X can produce. The other three conditions either happen outside X or do not by themselves guarantee a rise in X's output.
- ✗ (a) Technical progress elsewhere in the world does not by itself raise output in X. X gains only if it adopts that technology, which usually needs investment in X.
- ✗ (b) More people do not guarantee more output. Without matching capital, jobs and skills, output may not rise, and income per head can stay flat or fall. So population growth does not ensure economic growth.
- ✓ (c) New capital formation (net investment, meaning gross investment minus depreciation) adds machines, factories and infrastructure to X's capital stock. This expands X's productive capacity and so raises its real income. Investment is the key driver that creates capacity and raises labour productivity.
- ✗ (d) Growth in world trade can help countries that trade, but it happens outside X. It does not by itself expand X's capacity to produce, so it does not guarantee growth in X.
Remember · Growth means a rise in real national income. It rests on domestic capital formation, meaning net additions to the capital stock. World events or population growth alone do not guarantee it.
📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 2 (practise this chapter) · Class 11 Indian Economic Development, Ch 4 (practise this chapter)
Sources
- NCERT Class 12 · Introductory Macroeconomics, Chapter 2 “So new addition to capital stock in an economy is measured by net investment or new capital formation, which is expressed as Net Investment = Gross investment – Depreciation”
- NCERT Class 11 · Indian Economic Development, Chapter 4 “Economic growth means the increase in real national income of a country”
- Economic Survey 2019-20, Vol 1, Ch 1: Shifting Gears: Private Investment as the Key Driver of Growth, Jobs, Exports and Demand ↗ “Investment, especially private investment, is the “key driver” that drives demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction, and generates jobs.”
Question: UPSC Civil Services (Preliminary) 2013, General Studies Paper I. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). ·
