Change in inventories

Indian Economy glossary

Also called: Inventory investment, change in stocks · Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 12, Ch 2 "National Income Accounting"; Class 12, Ch 4 "Determination of Income and Employment"

Meaning

Change in inventories is the difference between what a firm produces and what it sells during a year. Change in inventories ≡ Production − Sales It is a flow and is counted as investment. It is positive when unsold stock piles up (accumulation) and negative when stock is used up (decumulation). The change may be planned, meaning intended, or unplanned, which happens when actual sales differ from expected sales.

Example

A firm starts with ₹100 of stock, produces ₹1,000 and sells ₹800. The change in inventories is ₹200, and closing stock is ₹300. India's change in stocks in 2024-25 was ₹3.19 lakh crore, about 1.7% of GDP (Provisional Estimates, constant 2011-12 prices).

Don't confuse with

  • Inventory: inventory is the stock of unsold goods and raw materials at a point of time. Change in inventories is the flow over the year.

Related concepts

Read more