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Net private domestic investment is equal to gross private domestic investment less capital consumption allowance. It is the most sensitive component of GDP. When it is negative it implies that the capital stock is being depleted and production has to be decreasing. Economic growth is implied in a positive net private domestic investment.
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The productive capacity of a nation will increase only if net investment is positive. This can easily be verified at the level of a single plant: the number of new machines installed in any given year must be greater than the machines that have been used up during that year. |
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