Harrod-Domar Model: Indian Economy Notes for UPSC

Harrod-Domar Model: Indian Economy Notes for UPSC The Harrod-Domar model is a foundational concept in economic growth theory and has been significant in shaping development planning, particularly in developing countries like India. Below is a detailed explanation tailored for UPSC aspirants. 1. Introduction The Harrod-Domar model, proposed independently by Sir Roy Harrod and Evsey Domar in the 1930s and 1940s, explores the relationship between investment, savings, and economic growth. It emphasizes the importance of capital accumulation and productivity in determining growth rates. 2. Core Assumptions The model is based on the following key assumptions: Savings-Investment Linkage : Economic growth depends on the level of savings and the efficiency of investment. Constant Capital-Output Ratio (ICOR) : The incremental capital-output ratio (ICOR) is constant, indicating the amount of capital needed to produce an additional unit of output. Full Employment : Resources are fully utilized, and any addi…