The engine of private investment-led growth sputters.Reserve Bank governor Bimal Jalan said that the economic fundamentals in 1998 were stronger than in 1994 when investment had boomed. He faulted the lack of confidence for the post-1996 recession, but did not explain why private investment had withdrawn into a shell. Planning Commission member Montek Singh Ahluwalia avoided saying why corporates were not restructuring to become competitive, but seemed to be waiting for an upswing in the economy. Businessmen, who had gathered under the aegis of Assocham, preferred to duck the issues posed by the duo, unsure of a scenario in which they had been cast as prime movers. To be fair, Ahluwalia came to their rescue. Thus, private investment in power and telecom was being sought because the public sector is resource-strapped. But the legal arrangements for unbundling risks were not anticipated, and have been slow to be put in place. This has retarded private investment in all those areas where the public sector has been vacating space. Aggregate investment, butprincipally foreign direct investment, will pick up as ways of resolving these problems are found.

That aggregate investment has been thwarted by the government's inability to cope with reform is true. But there is a deeper problem which defies explanation. Though savings are rising, the investor has become risk-averse. This is reflected in the preference for debt instruments at the expense of investment in equity. The savings surplus grows, and neither the government nor the private sector has a clue to the direction the economy is taking.