Capital formation is the accumulation of capital wealth in an specific accounting period of a country.
Explanation:
Capital formation helps a country to acquire capital wealth which is in turn spent in buying capital goods fro the country. Capital goods such as equipment, tools, buildings and heavy vehicles. Capital goods are needed to replace the older ones in order to increase the productivity. Higher the capital formation of the country the faster the economy grows.
Productivity level increase when human labor is also used effectively thus creating employment opportunities. Capital formation helps in increased employment opportunities which increases the standard of living of the people. This can finally put an end to the poverty which is prevailing in a country to an extent
