According to the recent political and economic update for India, ADB has said that 'given its much stronger position in the current Lok Sabha, there is optimism that this UPA coalition government will provide continuity with stability. It will also have greater flexibility to push ahead with several required policy reforms.'

The global financial crisis has resulted in a sharp slow-down in India's growth momentum from 9% in FY2007 to 6.7% in FY2008. The liquidity situation in India is better today as compared to what it was in the first quarter of this year.

As a result of the various stimulus measures to counter the economic slowdown, the fiscal deficit at the center is expected to increase to around 6% of GDP in FY2008, while the combined deficit including that of the states, is expected to touch 11%. According to the Fiscal
Responsibility and Budget Management Act of 2003, the fiscal deficit at the center should have been 3% by FY2008.

The report said that the Government is planning to selectively divest some of the Government's stake in key public sector companies. A comprehensive Goods and Services Tax (GST) will be rolled out by
1 April 2010. This will help in creating a seamless national common market by doing away with all other central and state level taxes. By removing tax-related distortions, introduction of GST is
expected to increase revenue mobilization.

The new Government will be essentially guided by the 11th FYP's assessment that the Indian economy faces the following key binding constraints: infrastructure bottlenecks and lack of long-term funds for infrastructure investment; systemic weaknesses within the agriculture
sector; interstate disparities in economic and social indicators; poor education and health indicators, and balancing of the growth-environment trade-off. The global economic crisis has only reinforced the urgency of addressing these constraints in a fiscally prudent manner.

The current and proposed operations program for India, which is closely aligned with the 11th FYP, therefore, remains fully relevant. Its strategic pillars - support for inclusive and environmentally sustainable growth; catalyzing investment through the use of innovative business and financing solutions; strengthening results orientation and emphasizing knowledge solutions (including capacity building); support for regional cooperation - will support the Government's development priorities. In addition to supporting infrastructure development in the transport, energy, urban, water resources management, and agriculture sectors with a focus on the backward states, ADB will scale up assistance for PPPs in infrastructure, climate change adaptation and mitigation, capacity building, knowledge creation, and regional cooperation. The proposed operations program also emphasizes the need to enhance support for non-sovereign operations and private sector development in line with Strategy 2020. ADB is also currently discussing with the Government additional and targeted assistance to address the impact of the financial crisis.

To mirror the Government of India's increasing orientation towards results, the proposed operations program has been designed within a results-based framework. Detailed country and sector results frameworks have been prepared in line with the 11th FYP and discussions with
the Government. Close monitoring of the operations program and continued focus on portfolio performance will help to ensure that ADB assistance is being used effectively in support of the Government's development priorities.

The relevance of the proposed India's operations program has, if anything, been reinforced by the political and economic developments of the past two months.