Indian History

Gross Fixed Capital Formation

Gross fixed capital formation (GFCF) means the acquisition of produced assets, purchases of second-hand assets including the production of such assets by producers for their own use, minus disposals. It is called investment.
GFCF measures the value of acquisitions of fixed assets by the business sector, governments and pure households (excluding their unincorporated enterprises) less disposals of fixed assets. GFCF is a component of the expenditure on gross domestic product (GDP), and thus shows something about how much of the new value added in the economy is invested rather than consumed.
Fixed assets are acquired through purchases, barter trade, capital transfers in kind, financial lease, improvement of fixed assets and natural growth of those natural assets that yield repeat products. The acquisition value includes acquisition taxes and fees and measures all-up costs of fixed investment.
Fixed assets are disposed of by sales, barter trade and capital transfers in kind. Disposal of fixed assets excludes consumption of fixed capital and exceptional losses due to natural disasters.
Gross fixed capital formation or fixed investment mainly refers to the value of new machinery and equipment plus the value of new construction activity undertaken during the year.
The fixed investment rate (ratio of gross fixed capital formation to GDP) declined from 29.2 per cent in 2015-16 to 26.9 per cent in 2016-17.
Total Gross Fixed Capital Formation for the year 2019-20 at constant prices(2011-12) is Rs.47,30,416 crores.
Gross Fixed Capital Formation for the year 2019-20 as % of GDP is 32.5
Consumption of fixed capital (CFC) means the decline in the value of the fixed assets of enterprises, governments and owners of dwellings in the household sector. It is also called as depreciation.
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