State two reasons for low capital formation in a developing economy.

1.	State two reasons for low capital formation in a developing economy.
Answer» Two reasons for low capital formation in a developing economy: 1. State of Economy: Majority of people in India are agriculturists, who follow old methods and also have uneconomic agricultural holdings. All these factors leave very low or no surplus with them. 2. Inflation: Due to inflationary trend, the price of commodity goes up very high and for middle class it becomes very difficult to save any amount for contributing to capital formation.

Answer»

Two reasons for low capital formation in a developing economy:

1. State of Economy: Majority of people in India are agriculturists, who follow old methods and also have uneconomic agricultural holdings. All these factors leave very low or no surplus with them.

2. Inflation: Due to inflationary trend, the price of commodity goes up very high and for middle class it becomes very difficult to save any amount for contributing to capital formation.

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State two reasons for low capital formation in a developing economy.

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