Karandikars & Associates

Net Capital Stock

Capital stock of a country is broadly referred to as that part of national wealth which is reproducible; it consists of all resources which contribute to the production of goods and services

The changing relationship between output and capital stock is an important aspect of the study of changes in productive efficiency in the various industries of a developing economy

Firm estimates of capital stock enhance the ability to associate capital formation with economic growth and to project future production possibilities, thereby leading to formulation of policies designed to achieve the desired economic objectives

These also provide a firm basis for estimating capital consumption needed to arrive at the estimates of various macro-economic aggregates on net basis

As per SNA 1993 (System of National Accounts 1993, adopted by the United Nations Statistical Commission) gross capital stock is the value of all fixed assets still in use at the end of an accounting period, at the actual or estimated current purchasers’ prices for new assets of same type, irrespective of age of the assets

The net or written-down values of all the fixed assets is equal to the actual or estimated current purchaser’s price of new assets of same type less the cumulative values of consumption of fixed capital (CFC) accrue up to that point in time

CFC is the cost of production. It may be defined in general terms as the decline, during the course of the accounting period, in the current value of the stock of fixed assets owned and used by a producer as a result of physical deterioration, normal obsolescence or normal accidental damage

Its value may deviate considerably from depreciation as recorded in business accounts. Thus CFC, in short, can be defined as that part of gross product which is required to replace fixed capital used up in the process of production during the period of account. This flow is based on the concept of economic life time of the individual assets

Net Capital Stock (NCS) comprises Net Fixed Capital Stock (NFCS) and Stock of Inventories

National Accounts Statistics (NAS) provides estimates of Net Capital Stock as on 31st March of a particular year by industry of use

As on 31st March 2024, India`s Net Capital Stock was Rs 995.9 lakh crore or Rs 995.9 trillion

Real estate, ownership of dwelling and professional services accounted for Rs. 222.9 trillion (22.4%), Manufacturing Rs. 183 trillion (18.4%) and Public administration and defence Rs. 120.6 trillion (12.1%)