difference between gross investment and net …

The gross investment includes net investment and replacement investment. Replace investment is funded through a depreciation reserve fund. Because this investment is exactly to depreciation losses. Thus, replacement investment just restores the value of fixed assets (which is lost on account of their depreciation). It does not lead to an increase in capital stock (or production capacity) of the producers. Net investment, on the other hand, is an investment that leads to an increase in the capital stock of the producers. It causes an increase in production capacity. Since net investment is related to the increase in the production capacity of the producers, we can say that it is a net investment (not replacement investment) that is needed to accelerate the pace of growth and development. Briefly, replacement investment helps maintain the existing level of GDP. Net investment leads to a shift in the GDP level, indicating growth and prosperity. Only net investment leads to add to the stock of capital. Depreciation only replaces the worn out fixed assets. It helps to maintain the existing stock of capital.