Public Investments in India : Delays and Cost Overruns

Public Investments in India have witnessed large delays and cost overruns. The same are estimated and shown to continue to be large, even though they have declined despite many changes in economic policy. What has brought about change in efficiency of overall investments is the sharp decline in the share of the public sector in investments. A modified Harrod-Domar model is used to estimate the growth sacrifice effects of delays and cost overruns and it is argued that the decline in the share of public investments in overall investments adds signficantly to the growth potential, which need to be recognised in macroeconomic policy as well. Environmental factors more than funds constraint have been the principal reason for delays and cost overruns