ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The capital formation in any country boosts its development as investment activities increases resulting in high production, increase in per-capita income, employment generation, the standard of living, poverty reduction, etc. Hence option 3 is correct.

Detailed explanation-2: -Capital formation is highly necessary for a country like India to maintain a higher rate of growth. Every economy in the world is not equally endowed with natural resources, uniform factors of production and the availability of capital. It is on this unevenness that most of the growth theory has been built.

Detailed explanation-3: -In economics, capital refers to the assets-physical tools, plants, and equipment-that allow for increased work productivity. By increasing productivity through improved capital equipment, more goods can be produced and the standard of living can rise.

Detailed explanation-4: -Generally, the higher the capital formation of an economy, the faster an economy can grow its aggregate income. To accumulate additional capital, a country needs to generate savings and investments from household savings or based on government policy.