Directions: The passage is given below, followed by several possible inferences which can be drawn from the facts stated in the passage. You have to examine each inference separately in the context of the passage and decide upon its degree of truth or falsity.
Passage
Efficiency of capital has long been an area of neglect and remains so. This aspect is underscored in the eleventh plan draft, ironically in its demand for the rate of investment being raised to 35.1% of GDP from 29.1% in 2004-05.
The irony lies in the fact that the planning commission has consistently relied on the Incremental Capital Output Ratio (ICOR) as tools of expediency rather than one designed to promote efficiency. Yet, the ratio conceptually seeks to get the most out of the capital stock that is existing and is being added. The ratio now is 3.7, i.e., the capital needed for an output of 1 is 3.7 times. If the effective ratio is brought down during 2007-2012, then it would be possible to achieve a GDP growth value of 8.9% over the period with a lesser level of investment than 35.1%.
Nobody doubts that capital formation is critical to a higher rate of growth in GDP but efficiency lies not so much on the capital stock as its utilisation.
Q. Higher the capital output ratio, higher is the growth of GDP.
Correct answer is option 'D'. Can you explain this answer?