New Delhi, Feb. 26 -- In his classic book, General Theory of Employment, Interest and Money, economist John Maynard Keynes suggested that investment decisions are driven more by "animal spirits" than cold calculations of risk and return. He described animal spirits as an "urge to action rather than inaction", in which entrepreneurial optimism drives risk capital.

Policymakers have tried to invoke these animal spirits in various ways: boosting infrastructure spending, cutting corporate tax rates, raising welfare payments, and recently by giving tax breaks to the middle class. But a boom in private investment remains elusive. The reason? Uncertainties at critical points in the investment process make it difficult to make decisions with con...