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Question

Which one of the following best explains the "crowding-in effect" observed in India?

This question was previously asked in
CDS 2 2026 Maths Question Paper (13-Sep-2026)
The correct answer is

Public investment leading to increase in private investment

The crowding-in effect refers to a situation where an increase in public investment leads to a rise in private investment, contrary to the crowding-out effect where government borrowing displaces private investment. This typically happens when public spending on infrastructure improves the overall economic environment, boosting private sector confidence and returns. Hence, public investment leading to increased private investment best explains the crowding-in effect.

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