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

The Capital-Output Ratio (COR) indicates the amount of capital required to produce one unit of output.

For example, if 5 units of capital are used to produce 1 unit of cloth, instead of the ideal 2 units, production is inefficient.

A high COR means that despite high savings and capital generation, output may not grow significantly. This can stem from poor technology or management.

This is also represented by the Harrod-Domar Model: G x c = S, where G = Growth, C = Incremental Capital Output Ratio (ICOR), and S = Savings.

Therefore, even with high savings, growth or output may remain low due to a high capital-output ratio.

Hence, option D is the correct answer.