 Hi all. In this short video, we are going to understand the economic concept incremental capital output ratio ICOR. The ICOR explains the relationship between the level of investment made in the economy and the subsequent increase in the GDP. The formula for ICOR is annual investment divided by annual increase in GDP. In simpler words, ICOR indicates how much additional investment is needed to produce an additional unit of output. In an economy, a lower ICOR is preferred. For example, let us consider Pakistan and China. Let us say in 2022, Pakistan needed 10% of investment to increase its overall output by 1%. So, Pakistan's ICOR was 10%. On the other hand, let us say in 2022, China needed 20% of investment to increase its overall output by 1%. Here, China's ICOR was 20%. In this case, Pakistan's production in 2022 is more efficient than China as Pakistan required lower investment than China to produce additional output. So, lower ICOR indicates the efficiency of country's production.