Capital Formation

Gross Fixed Capital Formation

1. Capital is the most important factor of production particularly in a developing economy. Capital Formation is defined as that part of country’s current output and imports which is not consumed or exported during the accounting period, but is set aside as an addition to its stock of capital goods.
2. Total Capital Formation can be broadly classified into
   • Gross Fixed Capital Formation
   • Change in stock of raw materials, semi-finished and finished goods.

Functions of Capital Formation Section

1. Capital Formation Section prepares the estimates of gross fixed capital formation of Haryana State for all the sectors of the economy both at current and constant prices on annual basis by:

• Industry of use
• Type of institutions
• Type of assets

2. A report on Gross Fixed Capital Formation in Haryana is prepared annually.

Importance of Estimates of Capital Formation

1. Helps in the context of planning and economic development as it reflects:

• The addition to the capital base of the economy
• Change in the modes and capacity of production.

2. Forms basis for

• Determining and judging policy decisions in resource mobilization
• Allocation of resources
• Assessing the growth potential of the economy.

Base Year

The base year of the Gross Fixed Capital Formation estimates is revised from time to time. Presently, Estimates of Gross Fixed Capital Formation are prepared with base year 1999-2000.

Data Source

Primary Data Collected

• From Headquarter of Govt. Departments.
• From District officers of various Govt. Departments through DSO’s.

Secondary Data

• From Boards and Corporations of state as well as Central Govt.
• Central Statistical Organizations and Reserve Bank of India.
• The Annual Reports of various Organizations.
• Survey/Study Reports.
• Results of Annual Survey of Industries(ASI).

Compilation of Gross Fixed Capital Formation

I. The estimates of Gross Fixed Capital Formation at the State level are worked out both at current and constant prices by

1. Industry of use
2. Type of institutions
3. Type of assets

II. By type of use: In this category, the economy has been divided into 13 sectors for estimation of Gross Fixed Capital Formation.

1. Agriculture
2. Forestry
3. Fishing
4. Mining & Quarrying
5. Manufacturing
6. Electricity, Gas and Water Supply
7. Construction
8. Transport, Storage and Communication
9. Trade, Hotels and Restaurants
10. Banking & Insurance
11. Real Estate, Ownership of Dwellings and Business Services
12. Public Administration
13. Other Services

III. By type of assets: For this type the estimates of Gross Fixed Capital Formation are divided into six categories.

1. Buildings
2. Roads & Bridges
3. Other Construction
4. Plant and Machinery
5. Transport Equipment
6. Other Equipment

IV. By type of Institutions: Under type of institutions, the estimates of Gross Fixed Capital Formation are prepared for

1. Public Sector
2. Private sector