Yes, I agree with the given statement that "if depreciation reserve fund is not maintained, production capacity in the economy would reduce". This is because of the reason that replacement of worn out assets has been promoted by depreciation reserve fund.

Impact of Not Maintaining Depreciation Reserve on Production Capacity

Maintaining a depreciation reserve is crucial for businesses as it helps them set aside funds to replace or upgrade assets as they wear out over time. If a company does not maintain a depreciation reserve, it can have a significant impact on the production capacity of the economy.

Reduction in Investment
Without a depreciation reserve, companies may not have enough funds set aside to replace old equipment or invest in new technology. This can lead to a decrease in investment in the economy, resulting in outdated machinery and reduced production capacity.

Decrease in Efficiency
Outdated equipment can lead to a decrease in efficiency and productivity. This can result in lower output levels and reduced competitiveness in the market. Ultimately, this can lead to a decrease in the overall production capacity of the economy.

Impact on Economic Growth
A decrease in production capacity can have a negative impact on economic growth. If businesses are not able to produce goods and services efficiently, it can slow down the overall growth of the economy. This can lead to lower employment levels and decreased consumer confidence.

Conclusion
In conclusion, maintaining a depreciation reserve is essential for businesses to ensure the continuous growth and sustainability of the economy. By setting aside funds for asset replacement and upgrades, companies can maintain their production capacity, remain competitive in the market, and contribute to overall economic growth.