There is a hole at the heart of India’s economy. And since the lights don’t seem to work, the nation risks falling into it. Power outages on a gargantuan scale have crippled the country this week, disrupting economic activity. The problem is not simply one of lack of investment.

True, India suffers from a power generation capacity shortfall. At peak times, such as the hot summer months, demand for electricity is a fifth higher than supply. Electricity sector reform allowing private investment over the past decade is changing that. New capacity should reach 26,000MW this year, twice the capacity installed last year because of investments by the likes of Tata Powerand Adani Power.

The trouble is, the sector’s economics do not add up. Fuel suppliers such as Coal Indiaand gas producers are unable to produce enough to keep the power stations fed. So power generators must resort to expensive imports. That pushes up input prices. Yet electricity tariffs are capped for consumers, meaning that electricity suppliers sell their product at a loss. No wonder India’s state power utilities have debts of Rupees 3tn ($54bn). And they are expected to treble their losses over the next three years.