Explanation:

 In simple words Gross Capital Formation is Investment. When people save, they tend to invest. The percentage of the investment made each year out of the total GDP is called Gross Capital Formation.
The, Rate of Gross Capital Formation is arrived as follows:
Rate of Capital Formation = (Investments /GDP) X 100
• The importance of the Gross Capital formation lies in the fact that this is that part of GDP which helps in the growth of the GDP itself. This is a must for achieving high rate of production, capital formation, changes in production techniques and changing in the outlook of the people themselves.
• To achieve, the Optimum rate of economic growth, the rate of capital formation should be above 40%.
The ratio of gross fixed capital formation to GDP climbed from 26.5 percent in 2003, reached a peak of 35.6 percent in 2007, and then slid back to 26.4 percent in 2017