Crisis? At India Economic Summit, it's back to business as usual

By Alistair Scrutton

NEW DELHI (Reuters) - After a year of global economic crisis and political limbo, investors in India are returning to business as usual -- this time with real hope that a new government might actually bring in needed financial reforms.

The word "reform" has been touted in India for years but if discussions at the World Economic Forum are anything to go by, Asia's third-largest economy may have turned a corner with its political will to help it reach 9-10 percent growth rates.

With the re-elected Congress-led government freed from the shackles of communist support, reforms from foreign investment in retail to recycling India's $400 billion in domestic savings to help fund infrastructure projects were seen as real possibilities.

Aside from 2005-2008 when India's economy expanded by more than 9 percent annually, the Asian giant has struggled to keep up with China's breakneck growth, hampered by infrastructure bottlenecks, red tape and an often plodding financial system.

"There is now political stability," said Saurabh Agrawal, head of investment banking for Bank of America Merrill Lynch in India. "The government is making the right noises and it looks like there is political will."

Congress's May general election win, recent state victories and a weak opposition have freed the hands of reformists in the government, including Prime Minister Manmohan Singh.

"India is in a sweet spot," one senior banker said, as the centre of gravity over the last year has leaned towards emerging economies, while Western economies struggled to stay afloat.

"If you want a high rate of return, where would you invest? Europe? Brazil? Russia? China?" he added, referring each time to their economic or regulatory problems. "India does stand out."