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FACTBOX-Achievements, challenges under India's government
July, 07th 2008

Support of a key regional party for the ruling coalition in India has eased concerns about early elections and could provide some political space for pushing economic reforms.

But analysts say they do not expect any major big bang push as the government is more keen to bring down inflation ahead of key state polls and federal elections in 2009. For details double click on [ID:nDEL104195].

Following are reforms and challenges faced by the United Progressive Alliance government since it took power in 2004.


The $1 trillion economy has grown an average 8.88 percent over the past four fiscal years. The central bank forecasts it to expand 8.0-8.5 percent in the 2008/09 fiscal year (April-March).

Many private sector economists expect growth to be slower than the central bank estimate as monetary tightening to contain spiralling inflation is expected to curb demand.

Inflation is above 11 percent annually, its highest in more than 13 years. The key lending rate is 8.5 percent, its highest in six years.


* VAT: In April 2005, pushed through introduction of value-added tax by state governments. Billed as India's most ambitious tax reform in five decades, it replaced a complex web of sales tax at state level and has boosted revenues.

PRIVATISATION: Abandoned privatisation of state-owned firms completely.

* CONVERTIBILITY: Prime Minister Manmohan Singh called for progress on greater convertibility in 2006 and a panel recommended moving towards a fuller currency float in three phases ending in 2010/11.

* FISCAL DISCIPLINE: Implemented the Fiscal Responsibility and Budget Management Act introduced by the previous government; the Act stipulates the federal fiscal deficit must fall to 3 percent of GDP by 2008/09.

Aims to cut its deficit to 2.5 percent in 08/09 but economists say off-budget subsidies, farm loan waiver and an expected hike in civil servant salaries may exceed the estimate.

* FARM LOAN WAIVER: In 2008, announced an ambitious plan to write off debts of small farmers, totalling $16.6 billion. Around 43 million farmers will benefit from the plan.

* RURAL JOBS: Implemented National Rural Employment Guarantee Programme, which assures 100 days of employment to every rural household at a minimum daily wage of 60 rupees ($1.4).

* INSURANCE: Proposal to raise foreign equity share in insurance to 49 percent from 26 percent stalled due to opposition from leftist allies.

* RETAIL: Allowed single brand foreign retailers to take 51 percent stake in venture with local partner. Restricts multi-brand retailers to operate through wholesale or franchise and licence operations.

* AVIATION: Raised ceiling for foreign investment in domestic carriers to 49 percent from 40 percent. But foreign airlines still cannot hold any stake in Indian carriers. Allowed 74 percent stake in non-scheduled, chartered and cargo airlines.

TELECOM: Raised ceiling for foreign investment in local telecom operators to 74 percent from 49 percent.

* BANKING: Bill to allow foreign banks voting rights equal to the stake held by them in private sector banks pending in parliament since 2005. ($1=43.10 rupees) (Reporting by V. Ramakrishnan; Editing by Surojit Gupta and Valerie Lee)

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