How Much Investment Buys a Point of Growth in India? The Incremental Capital-Output Ratio, 1961–2025, Why Averages of Annual ICORs Do Not Exist, and Five Asian Comparators

The incremental capital-output ratio (ICOR) is widely used in Indian planning to translate a growth target into an investment requirement. Using World Bank constant-price data on gross fixed capital formation and GDP for 1960 to 2025, I compute India's ICOR as a ratio of sums over each period, which equals the weighted investment rate divided by weighted growth exactly. The ICOR was 4.51 in 1962–1970, 5.92 in 1971–1980, 3.29 in the 1980s, 3.56 in the 1990s, 3.85 in 2001–2010, 4.68 in 2011–2019 and 3.99 in 2021–2025. An exact log split shows that the faster growth of the 1980s came almost entirely from a lower ICOR, while the rise in growth in the 2000s came from a higher investment rate. I prove three results. First, the average of annual ICORs exceeds the ratio of averages under independence (Jensen). Second, if annual growth has a density that is positive at zero, the annual ICOR has no finite mean, so averages of annual ICORs do not converge; in India the mean of annual ICORs for 1962–1970 is −36.20 because of a single year. Third, with depreciation the ICOR exceeds the capital-output ratio by the factor 1/(1−δv/s). Across 86 economies, 1991 to 2025, the average investment rate explains 1.4% of the variation in average growth.