The government has failed to make changes aimed at reducing economic controls and is focusing on manufacturing instead of services, Roach said in a note to investors. "If these trends turn out to be harbingers of more backtracking ahead, all bets could be off on the Indian growth miracle.'

Finance minister P Chidambaram's budget on Feb 28 cut some taxes, increased food and fertilizer subsidies and raised spending on health, textiles and state-owned companies, while announcing a 68 per cent increase in debt sales to fund plans.

That had prompted concern about the level of borrowings countering the effect of economic growth. The proposals made in the budget aren't likely to erode the economic-change programme started in 1991, Roach said.

"The impressive growth momentum of recent years does not seem likely to vanish into thin air,' he said.

The government may choose to introduce non-revenue items separately, allowing it to alter economic policy such as on overseas investment outside the annual budget speech.

The benchmark Mumbai stock exchange 'sensitive index' has risen everyday save one since the budget announcement. Overseas investors have bought a net $2.58 billion in stocks and a net $125.4 million in bonds this year as of March 4. They invested a record $9.19 billion in stocks and bonds in 2004.

The combined budget deficit of India's federal and state governments is expected to shrink to 8.8 per cent of GDP in the year starting April 1 from 9.5 per cent this year, Roach said. "That will do nothing to boost national saving, essential if India wants to increase the investment share of its economy.'

India has a savings rate of about 28 per cent, compared with 48 per cent in China, the report said.