Question

Explain various types of investment expenditure.

What are various components of investment expenditure?

Answer 1

Types of Investment Expenditure:

1. Gross Investment: It is the total investment in fixed assets like buildings, machines and inventories (stock) during a year without deducting capital depreciation or capital consumption.
2. Net Investment: Net investment is the gross investment minus capital consumption during a year. Capital consumption includes:
   • Depreciation of capital assets.
   • Losses to capital assets due to fire, earthquakes, etc.
3. Autonomous Investment: These are investments made by the government for the welfare and benefit of the people. These investments are made without any profit motives. This type includes investments made by the government in roads, railways, bridges, dams, communication facilities health and education facilities, exploration of oil and natural gases, etc.
4. Induced Investment: These are investments made by the private sector or private entrepreneurs mainly for profit motive; it is prominent in capitalistic and free-market economics. Private sector investment is mostly induced investment.
5. Financial Investment: It is the investment expenditure made for the purchase of shares, bonds, securities, stock, etc. in the country during the year. This investment is expressed in money terms.
6. Real Investment: It is the investment made for creating a new stock of real/physical capital assets such as machines, factories, buildings, tools and equipment, etc. in the country during a year. This investment is expressed in real/physical terms.