CII has made optimistic projections on the boom in software exports. It is not alone in projecting that IT will soon become a mega forex earner. But the prospect, according to gloomsayers, has its flip side. The inflow from software exports will bloat forex reserves and, in turn, the domestic money supply; the first will firm up the rupee and the second will stoke inflation. Indian industry will become uncompetitive.

This criticism assumes sluggish demand for foreign currency; that is, weak imports. The assumption is that the rate of investment has plateaued, and will not pick up; hence, there will be no import of plant and machinery.

This is a sea-change in perception. In the bad old days of planning, investment growth was retarded by non-availability of foreign exchange.

Today the prospect of excess forex accumulation in the face of it is viewed with apprehension; the investment slack is taken for granted.

CII is optimistic about a pick-up in investment. It points to the surge in liquidity after the inflow of the millennium deposit, to the high level of private domestic savings and the likely decline in government dis-saving and to the improved efficiency in the use of capital. But the counterpoints of the gloomsayers cannot be lightly dismissed.

There has been no shortage of liquidity since 1997. Fear of non-performing assets have deterred bank lending. This is another way of pointing to the dearth of bankable projects. Availability of savings has not been a constraint on private investment. The decline in government dis-saving could adversely affect public investment. Productivity gains, actual and prospective, in the face of weak aggregate demand, have only meant a fall in industrial prices in relation to other prices; they have not improved financial returns. Besides, claimed productivity gains have not pushed manufactures into exports. Instead,Indian business clamours for import protection.

Consumer demand-led growth is not ticking. It has yet to wipe out excess capacity. So the drive for investment is weak. This is why CII's propitious growth scenario does not fire the imagination. Domestic demand can drive GDP growth this far (6-6.5 per cent) and no farther. Note that there are sectors registering high growth via exports,but their income does not boost aggregate consumer demand.

The classic prescription to rev up domestic demand would be to step up public outlay. This is forbidden in the reform milieu; besides, the Treasury is empty. The ball is in the court of the private sector. In CII's scenario, domestic financial savings are ample; so are forex resources. The Indian private sector is unable to get its act together to enlarge investment.

Ebbing hope at the turn of the year is not mere happenstance. The home market is not fuelling investment growth. A decade after reform, the Indian economy has not acquired the export orientation (despite respectable currency depreciation) required to overcome the domestic demand constraint.

Why has reform not delivered? It is time to introspect.