Investment criteria, boradly speaking, refer to the principles which govern capital allocation in an economy. The subject of capital allocation assumes utmost importance in the peculiar conditions of under developed countries which are mostly capital starved. Capital, being the hub of all economic development and also in short supply, can only be used very judiciously.
The economy and efficiency in the use of capital are thus the abiding concerns of planners. There is however no consensus among the economists on the issue of criteria or rules which should govern capital allocation, or tests or standards or touchstones by which an investment decision may be judged. Investment criteria have therefore proliferated depending upon the specific objectives and economic priorities set forth by national leadership.
The different criteria reflect, by and large, difference of opinion as to what less developed countries ought to attempt to maximize, the broad choice being between present and future levels of output and consumption.
Allocation for social and economic overheads is not made on the basis of any rigorous criteria due perhaps to the peculiar character of its component parts. This is however not the case with regards to industry and agriculture. Various criteria have been developed by the economists.
The economy and efficiency in the use of capital are thus the abiding concerns of planners. There is however no consensus among the economists on the issue of criteria or rules which should govern capital allocation, or tests or standards or touchstones by which an investment decision may be judged. Investment criteria have therefore proliferated depending upon the specific objectives and economic priorities set forth by national leadership.
The different criteria reflect, by and large, difference of opinion as to what less developed countries ought to attempt to maximize, the broad choice being between present and future levels of output and consumption.
Allocation for social and economic overheads is not made on the basis of any rigorous criteria due perhaps to the peculiar character of its component parts. This is however not the case with regards to industry and agriculture. Various criteria have been developed by the economists.
