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

• (a) Weak administrative machinery: This can reduce efficiency of investment, but it is not the standard macroeconomic reason linking high savings/capital formation to low output growth. Verdict: Not the best answer.
• (b) Illiteracy: Illiteracy affects human capital and productivity, but the question asks specifically why capital formation may not translate into much output. Verdict: Not the direct reason.
• (c) High population density: Population density by itself does not explain weak output response to capital formation. Verdict: Incorrect.
• (d) High capital-output ratio: If more units of capital are needed to produce one extra unit of output, then even high capital formation yields only a small increase in output. Verdict: Correct.

Answer: (d) High capital-output ratio.