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Capital formation promotes investment which in turn provides income to the investors as well as help in increase in production and thus promoting economic growth. This capital formation is important for economic growth.
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Capital formation is most important for the economic, because when there is effective capital formation it will increase the earning capacity of firm, when earnings of the firm increases it obviously have positive impact on the economic growth of the country.

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To any activity capital most needed component.Hence capital formation is so much needed.

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Capital formation is important in economic growth if capital or investment increases than infrastructure develops as new companies enters in market
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Capital formation leads to infrastucuture creation that leads to more jobs in economy. This pumps more money into the economy as people now buy more goods and service, consequently companies earn more profits and every sector of the economy grows, thus leading to economic growth of the country.

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Capital formation leads to investment. This investment leads to production. Production leads to more employment, which leads to more income and better standard of living follows more savings which again leads to capital formation. And gradually it increases economic growth.
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Capital plays a vital role in the modern productive system. Production without capital is hard for us even to imagine. Accumulation of capital goods every year greatly increases the national product or income. Capital accumulation is necessary to provide people with tools and implements of production. If the population goes on increasing and no net capital accumulation takes place, then the growing population would not be able to get necessary tools, instruments, machines and other means of production with the result that their capacity to produce would be seriously affected.

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