Capital formation is basically the increase in the stock of capital in a country. The stock of capital includes the goods or things that help in creating capital. Capital formation include Machines, Factories, Transport Equipment, Tools, Materials, Electricity. All such things are used for the future production of goods or services which will increase the stock of capital for the companies and for the economy of a country as well. Deep down the concept of capital formation, buyers and sellers are involved, but it is not solely dependent upon them. Capital formation is simply the generation of capital in a country.
