Gross Capital Formation (GCF) & Gross Fixed Capital Formation (GFCF)

Gross Capital Formation (GCF) : Gross Capital Formation (GCF) refers to the total value of physical assets that are created in an economy over a specific period, and it includes investments in various sectors like infrastructure, machinery, buildings, and equipment. In other words, GCF is the process by which a country adds to its stock of physical capital, which is used for the production of goods and services. It encompasses both private and public investments and is a key indicator of economic growth. Components of GCF: Fixed Capital : Investments in long-term assets like buildings, machinery, and infrastructure. Inventory Investment : The change in the stock of goods (e.g., raw materials, finished goods) that businesses hold during a period. Formula for Gross Capital Formation: GCF = Gross Fixed Capital Formation + Change in Inventories \text{GCF} = \text{Gross Fixed Capital Formation} + \text{Change in Inventories} Thus, GCF includes all investments, both in fixed assets and in inventories, tha…