Friday, October 24, 2008

Wasteful investment

This picture shows what happens when supply is created irrespective of demand. Wasteful investment!

These houses were built two years ago under the Maoists resettlement program. Two training centers and 80 houses (one for two family) were built. Some form of wearing and tearing (depreciation) is already seen in these houses without a single family residing on it. This is a complete waste of resources by the government.

Without first assessing whether the displaced families want to resettle in this particular location (Rupendehi) the government went ahead with the project. Officials now concede that the choice of location was wrong in the first place. This is a typical waste of resource resulting from lack of careful diagnostic of incentives and constraints to resettlement.

Money wasted: NRs 1 crore 65 lakhs (do the maths in dollars, US$1=NRs 74). More here.