Three heavyweights of the Vajpayee administration who have a say in economic policy were listened to with rapt attention by the economic editors of the print and electronic media, but at the end of the day they were no wiser about why, according to policy makers, the economy was not ticking.

Sinha said everything was right with the economy. The trouble was the US sanctions. It was a big blow from which India is now recovering. Hegde went along with the proposition, but his focus was on the east Asian currency crisis. Singh talked about IMF conditionalities, etc. He sounded somewhat off-key. India after all has beenreducing its debt to the IMF year after year. So IMF is hardly the problem for this country.

This concern for the `other' reflects a desire to get foreign direct investment to catalyse India's economic growth. This is not a very complimentary thing to say about a government that swears by Swadeshi. But listen to Sinha. He takes on US sanctions, aid interruption, Moody's downgrading of India's sovereign rating and the east Asian crisis all in one breath. Add to this his references to the appraisal norms of the fund-bank, which he obviously thinks are unsuited to the developing countries. These are all basically foreign investment retardants. Why pick on them to explain slowing investment in an economy free from the foreign exchange constraint?

Listen to feel-good Sinha again: savings are ample in the domestic economy, notably small savings, but these are flowing into the banks, not into the capital markets. Sinha is thus saying that the domestic private sector is unable to tap savings for investment; or,that domestic savers are unwilling to put their money in private sector projects.

When private investment loses bounce, policy requires a step-up in public investment. Sinha inherited a shortfall in plan (public) investment in the first two years (of the Ninth Plan) of Rs 17,000 crore (at 1996-97 prices). He has pushed up plan allocation for this year, but the increase will come predominantly from internal and extra-budgetary resources (principally market borrowings). This makes the projected increase in public investment less than firm. And Sinha cannot push up budgetary support to the plan: he is committed to a fiscal deficit of 5.6 per cent of GDP this year.

So public investment is slated to give a feeble kick-start to the economy. Sinha has little option but to go in for foreign direct investment in a big way. But he is loth to admit this. Instead he talks of radiating the feel-good factor, sprinkles it like Gangajal. The trouble is that even if industrial houses buy the feel-good mantra, theinvestor--who has burnt his fingers in CRB Caps, in high profile mutual funds like Morgan Stanley and in non-banking finance companies--will not be lured by glib assurances.

Sinha's appraisal that everything is right with the economy (even if it is not ticking) is less than accurate. True, the Planning Commission sticks to its targets: GDP growth 7 per cent, savings 26.2 per cent of GDP and so forth. But when the GDP grows by 5 per cent (and not 7 per cent), savings of 26.2 per cent mean a decline in the absolute level of savings from the level projected.

Furthermore, available savings are underinvested. Savings must equal investment by definition. The question is if investment is taking place in new power houses, roads, ports, manufactures and so forth; this is the kind of investment that raises growth. It is now accepted that hard investment has slackened. But then how is saving-investment equality established? The answer is, through investment in foreign currency assets.

Thus, last year availableforeign currency faced a shortage of buyers. So the Reserve Bank absorbed the excess foreign currency and invested these abroad. This brought about the savings-investment equality; however, the fact that a capital-short country has to invest in financial assets abroad shows that something is seriously wrong with the economy.

It makes little sense for a country which underinvests domestic savings to cry hoarse against retardants to foreign investment (savings) in the economy. The danger is that domestic enterprise could be supplanted by foreign investment. Reforms, be it noted, started with anti-statism: the public sector was the big drag on private investment and growth. Now deficient public investment is identified as the villain of the piece. Sinha has chosen to ignore the paradox because politics requires him to woo business magnates. He must address the issue why private investment has flagged, why it does not generate the production of exportables and why the lay investor has withdrawn into a shell.