Cost Of Delay Is Retarding Economic Growth The cost of delay refers to the additional cost incurred or the decline in the real value of the work.
This cost is usually incurred in developing economies like India etc.
the major reason for this cost is bureaucracy.
Not only public sector but private sector to a very large extent faces this delay, which in turn increases the cost.
Economic growth is the addition to the value of goods and services one possess.
So when cost increase and the time period for the work increases, this decline the growth process in the economy, as there is no addition in the value of the produce.
The same product which was to be produced at a lower price is now being produced at a higher price and at a later time.
So we can say that delay increases the cost and thus therefore hampering the national growth.
Suppose, if a project was started in 2000 and was to be completed by Dec, 2005.
If the process slowdown due to reasons like political interference, rigid rules& regulations etc and it finishes by end of 2006.
The cost would have increased by almost 25% in just 1 year.
As inputs like Steel, Cement etc have become very expensive in the year only.
Also besides this the workforce or the machinery which was allocated to this project would not be available for one more year , which would have otherwise been able todo some developmental task for the economy.
Also during this period our peers like Brazil or other developmental economies have done their developmental task at the same rate, thus leading to a higher growth in their economy.
The Cost of delay is the flipside of the ROI calculation, every month you wait costs the economy the value of the delayed benefits for that month which it would have derived if the work was at regular pace.
Multiply it by 12, and adjust for the cost of capital and you can estimate your annual cost of delay.
EXAMPLE DELHI-GURGAON EXPRESSWAY The 27.
7-km long expressway which will make drive from Delhi to Gurgaon just 15 minutes long, was originally scheduled to be completed in July 2005, but the deadline was later revised to December,2006 due to several revisions made by the Haryana & Delhi state governments, the reason for the same might be the bureaucratic problems.
Again in Oct, 2006 just before 2 months prior to its scheduled completion date , the project deadline was rescheduled to Oct ,2007.
The NHAI (National Highway Authority of India) has blamed the private party Jaypee DSC ventures for slow progress.
The party earlier promised to complete 90% of work by Dec, 2006, but it failed to meet the deadline.
As a result only 2 out of 5 flyovers were opened for public in Oct, 2006.
When contacted Jaypee DSC disclosed that the work has been delayed due to non approval from the government departments, and further because of the uncertain heavy rains.
This was a small example of the delays caused in day to day working; such delays hamper the economic growth not only directly but also indirectly.
Due to this very reason many foreign players, investors are not ready to invest in India as they feel that their money might not be properly utilized due to undue government interference and delays.
This is a major setback for Indian economy and its growth prospects.
This cost is usually incurred in developing economies like India etc.
the major reason for this cost is bureaucracy.
Not only public sector but private sector to a very large extent faces this delay, which in turn increases the cost.
Economic growth is the addition to the value of goods and services one possess.
So when cost increase and the time period for the work increases, this decline the growth process in the economy, as there is no addition in the value of the produce.
The same product which was to be produced at a lower price is now being produced at a higher price and at a later time.
So we can say that delay increases the cost and thus therefore hampering the national growth.
Suppose, if a project was started in 2000 and was to be completed by Dec, 2005.
If the process slowdown due to reasons like political interference, rigid rules& regulations etc and it finishes by end of 2006.
The cost would have increased by almost 25% in just 1 year.
As inputs like Steel, Cement etc have become very expensive in the year only.
Also besides this the workforce or the machinery which was allocated to this project would not be available for one more year , which would have otherwise been able todo some developmental task for the economy.
Also during this period our peers like Brazil or other developmental economies have done their developmental task at the same rate, thus leading to a higher growth in their economy.
The Cost of delay is the flipside of the ROI calculation, every month you wait costs the economy the value of the delayed benefits for that month which it would have derived if the work was at regular pace.
Multiply it by 12, and adjust for the cost of capital and you can estimate your annual cost of delay.
EXAMPLE DELHI-GURGAON EXPRESSWAY The 27.
7-km long expressway which will make drive from Delhi to Gurgaon just 15 minutes long, was originally scheduled to be completed in July 2005, but the deadline was later revised to December,2006 due to several revisions made by the Haryana & Delhi state governments, the reason for the same might be the bureaucratic problems.
Again in Oct, 2006 just before 2 months prior to its scheduled completion date , the project deadline was rescheduled to Oct ,2007.
The NHAI (National Highway Authority of India) has blamed the private party Jaypee DSC ventures for slow progress.
The party earlier promised to complete 90% of work by Dec, 2006, but it failed to meet the deadline.
As a result only 2 out of 5 flyovers were opened for public in Oct, 2006.
When contacted Jaypee DSC disclosed that the work has been delayed due to non approval from the government departments, and further because of the uncertain heavy rains.
This was a small example of the delays caused in day to day working; such delays hamper the economic growth not only directly but also indirectly.
Due to this very reason many foreign players, investors are not ready to invest in India as they feel that their money might not be properly utilized due to undue government interference and delays.
This is a major setback for Indian economy and its growth prospects.
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