Reuters Summit - India on recovery trail, but challenges loom

By Pratish Narayanan

MUMBAI (Reuters) - India evaded the eye of the storm that sucked the global economy into the worst downturn since the Great Depression, and has emerged, along with China, as a leader of the nascent worldwide recovery.

The stock market has surged more than 70 percent this year, growth in Asia's third-largest economy is expected to be 6 to 7 percent this fiscal year and accelerate in 2010/11, and a rash of companies are raising billions of dollars to fuel expansion.

The rousing re-election of the Congress party-led government in May freed it from having to depend on communist allies, lifting hopes of an acceleration in long-delayed financial reforms and infrastructure investment.

Still, questions linger.

The government is hamstrung by a stubbornly high fiscal deficit, consumer spending is being driven by stimulus measures that are unsustainable, and the global demand that drove India's once red-hot outsourcing sector is slow in returning.

A lack of inclusive growth and a volatile region means there are internal and external security risks, and corruption and India's infamous red tape are stalling infrastructure projects needed by a rapidly urbanising population of more than 1.1 billion.

These will be among the issues discussed during the fourth annual Reuters India Investment Summit on Nov 23-25, when top executives, bankers and officials will discuss their plans and the broader opportunities and challenges for the world's second-fastest growing major economy.

"Policy reforms have been very, very long in their coming in our country, and that could be a significant drawback in India reaching 10 percent growth," said Sashi Krishnan, chief investment officer at Bajaj Allianz Life Insurance Co.