Capital formation is the process through which investors increase the amount of capital they control. This involves saving and investing money in various financial instruments like stocks, bonds, or starting a business. By accumulating savings and investing in productive assets, investors contribute to the overall growth of the economy.
Capital formation is essential for economic development as it leads to the creation of new businesses, job opportunities, and infrastructure development. It helps in increasing productivity, improving technology, and stimulating growth in various sectors of the economy.
In summary, capital formation is the process by which individuals or entities save and invest money to generate wealth and contribute to economic growth.
