Economic development takes place when the economic welfare of the people of a country increases over a long period.' Economic development is to a great extent depends on the rate of investment or capital formation2 which are necessary for fast development. Capital formation refers to an increase in the stock of real capital like machines, plants, tools, equipment, buildings and inventories of raw materials. It leads to an increase in the supply of real capital thereby enhancing productive capacity of an economy. As a result, the I economy of a country would be in a position to make a larger utilisation of natural and manpower resources to achieve higher rate of growth in real national income. Thus, countries having higher rates of capital formation are found to have much stronger base for accelerated development as compared to countries with lower rate of capital formation.
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