It holds that a 8-10 per cent growth is feasible, post-April 2001. This assessment of prospects will be meaningful if it impacts on business expectations in the foreseeable future. And that is a big if.

Consumer durables' demand-driven growth has swayed business expectations since the first episode of reform. This is logical. As capacity use rises in the durables industries, investment in these (should) start growing. This impulse to invest has not been in evidence. Production of consumer durables rose, but not the demand for capital goods.

The explanation proferred was that there was massive over-investment during 1994-96. Correct. But over the years, demand growth should have boosted capacity utilisation to the point where it triggers capacity addition. This point, it seems, has not been reached. Besides, the initial boom in consumer durables did not radiate to ordinary consumer goods (clothing, footwear,etc).

And now the demand is flagging, visibly so in automobiles and scooters (motorcycles are doing nicely; instead of graduating from scooters to cars, the consumer seems to be moving over to mobikes). Trucks are on a rough road. CTVs and refrigerators are no longer fast-moving goods.

The consumer demand base of the economy is not large enough to drive investment. Once the suppressed demand for goods was satisfied following reductions in income tax and excise tax rates, the market has moved back to normal. Even high incomes in the expanding services sector (IT) are an insufficient demand fuel.

So, is CII whistling in the dark? Actually, it is not talking of demand-driven growth. It just bypasses the issue in projecting the scenario for the coming decade, and focuses on investment. Thus,it says that competition among states for growth and investment is reinforcing the reform process of the Centre and the spread effect is bound to improve the investment climate.

CII focuses on the government's willingness to reduce the fiscal deficit and market borrowings which, together with fresh reforms in the financial sector, should result in enlarged availability of funds at declining interest rates and accelerating private investment.

CII's scenario is facile, even though it has got the trend of fiscal and financial sector reforms right. The point is that private investment hinges on expectations of demand. And domestic demand is constrained by modest income growth and its unequal distribution.

The reckoning is that home market demand can support a GDP growth of at best 7 per cent a year. Growth above this must come from export. The extra 2 to 3 percentage points of growth must come from international demand. As of now, the export effort is confined to garments,diamond re-export and software.

This helps narrow the current account gap. But the basic industrial production system must be geared to exports to cover the extra growth above 7 per cent.

How many brick and mortar companies are into export? CII talks of evidence of improvement in the marginal efficiency of capital, and expects this to show a steady rise. Amen. But CII does not translate the claim into export diversification and growth.