Despite being a high saving economy, capital formation may not result in significant increase in output due to

1. The question asks why a high saving economy might not see a significant increase in output despite high capital formation (investment resulting from savings). 2. Capital formation means increasing the stock of physical capital (machinery, infrastructure, etc.). 3. The relationship between the amount of capital invested and the resulting increase in output is measured by the capital-output ratio (COR). It indicates how many units of capital are required to produce one unit of output. 4. A high capital-output ratio (Option D) means that a large amount of investment (capital formation) is needed to achieve even a small increase in output. This implies inefficiency in the use of capital. 5. Therefore, even if savings are high and lead to substantial capital formation, if the capital-output ratio is high, the resulting growth in output will not be significant. 6. Options (A) weak administrative machinery, (B) illiteracy, and (C) high population density can negatively impact economic efficiency and growth, but the direct economic link explaining why investment might not translate efficiently into output is best captured by the capital-output ratio.