What is ICOR? Why is it Needed over GDP? UGC Economics Lectures @ doorsteptutor.com | GS Mains UPSC

Our Websites

Call: [phone]
#upscpreparation #iasprelims2024 #howtoqualifyias #iaspreparationstrategy #doorsteptutor #netpaper1 #ugcnetpreparation #howtoqualifyJRF #iasmains #icor #gdp #equity #equality

It looks at how much money is being put towards fresh investments. And then adjusts it against the actual economic growth. Or put another way, it tells us how much additional capital is needed to generate a 1% higher output. So, if you need 10% more capital to make that output leap, then ICOR is 10. So in this case, lower the ratio, the better it is. That’s when our capital is productive!
But the end result is that it indicates the economy is becoming more efficient.
India at 4.4
And the numbers seem to be adding up quite well here. In the past decade, we’ve dropped from 7.5 to roughly 4.5. We seem to be heading quite nicely towards the sweet spot of 3–4 that economists recommend.