What is Gross Fixed Capital Formation (GFCF)?

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About Gross Fixed Capital Formation (GFCF)

GFCF refers to the growth in the size of fixed capital in an economy.
Fixed assets/capital are tangible or intangible assets produced as outputs from production processes that are used repeatedly, or continuously, for more than one year.
GFCF consists of resident producers’ investments, deducting disposals, in fixed assets during a given period.
It also includes certain additions to the value of non-produced assets realized by producers or institutional units.
Private GFCF can serve as a rough indicator of how much the private sector in an economy is willing to invest.
Overall GFCF also includes capital formation as a result of investment by the government.
GFCF matters because fixed capital, by helping workers produce a greater amount of goods and services each year, helps to boost economic growth and improve living standards.
In other words, fixed capital is what largely determines the overall output of an economy and, hence, what consumers can actually purchase in the market.
Developed economies such as the U.S. possess more fixed capitalper capita than developing economies such as India.
Statistics:
- GFCF in the Indian economy increased significantly from INR 32.78 lakh crore in 2014-15 to INR 54.35 lakh crore in 2022-2023.
- This surge in capital formation reflects substantial investments in infrastructure, industry, and public goods.

Q1: What is Gross Domestic Product (GDP)?

It is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.

Source: Why have private investments dropped? | Explained