Though India's economic reforms started a decade-and-half back, the economic potential of the country was acknowledged much later by multilateral institutions, think tanks and analysts. Even then, the country never caught the world's imagination the way China had over the last two decades.

India was always considered a laggard when it came to performance, hesitant to initiate reforms and almost always letting opportunities slip by. When China maintained GDP growth of over 9 per cent consistently, our performance has been patchy. Even when manufacturing and services performed exceedingly well, we were still left praying to the rain gods to not let down farm output.

Despite the reduction in the absolute number of the poor, India remained host to a significant percentage of the world's poor when China had managed the most dramatic reduction in the number of poor in history.

The year 2005 saw a significant shift in the way the world looks at India; it started mentioning India and China in the same breath. Conferences were no longer about 'China versus. India' but 'China and India'. Some even coined the term Chindia, to reflect the increasing significance of both the countries in the new global economic order.

India was no longer only about cows, snake charmers, a bunch of nerds and outsourcing. The country was finally accepted as an emerging economic power which could become the third-largest economy by the middle of the century. 'The India Growth Story' became an established theme which finally captured the imagination of the rest of the world.

Surging economic growth
The economy grew at 8 per cent during the first half of the current financial year and looks all set to achieve growth of over 7 per cent for the third year in a row. The underlying momentum is visibly strong and has given enough confidence to policy makers to forecast sustained growth above these levels over the next few years.

The planning commission is targeting growth of over 8 per cent during the next plan period. With more focus on agricultural reforms, this is very much possible. If the economy can build on the momentum in manufacturing, even the 10 per cent growth rate targeted by the prime minister is within reach.

After last year's slumber, the government finally got serious about the infrastructure sector. The ambitious national highway development programme came back to prominence its next phases are being finalised.

The airport modernisation programme finally moved to the tendering stage and should move to implementation by early next year despite the latest re-look at the tendering process. The government also announced a major development programme for sea ports towards the end of the year. These infrastructure investments should help considerably in sustaining the economic momentum.

Sensational highs for stock indices
At the beginning of the year most analysts and brokerages, including foreign brokerages, were sceptical of a continued strong performance by the stock markets. They were all proved wrong as the India growth story attracted more and more investors to the markets.

The year saw the Sensex closing with returns of more than 40 per cent and the Nifty went up more than 35 per cent. Both indices recorded new lifetime highs during the year as the markets saw higher participation from domestic investors.

Calendar year FDI flows topped the $10-billion mark for the first time ever during the year. Investors from Japan and other South-east Asian countries started investing while those from the US and Europe increased their exposure to the Indian markets. India-dedicated funds became the trend and investment meets and conferences became frequent as interest in the country rose further.

The primary issues market gained momentum through the year and by the second-half a number of companies started coming out with IPO's. Unlike the '90s, the quality of the companies coming out with issues are significantly higher as only companies with a track record are now allowed to raise capital. The strong demand for public issues saw aggressive pricing of issues in the second half of the year.

Second hottest global FDI destination
India moved one notch higher and emerged as the second most favoured FDI destination behind China but moving above the US. This is another clear indication that overseas investors are now taking the country's manufacturing potential more seriously.

The year also saw some very large FDI proposals reaching the agreement stage, especially in the steel sector. The multi-billion dollar proposals of Posco and Mittal Steel deserve special mention. Large foreign corporations are increasing their investments in established domestic companies, like Vodafone picking up a stake in Bharti TeleVentures.

An area where the country lagged significantly was manufacturing of electronic goods and chip manufacturing, despite a sizeable domestic market. The year saw significant investment proposals in this sector from some of the largest global corporations.

Some of the largest electronic contract manufacturing companies globally, like Flextronics, are stepping up their presence in the country. Strong engineering and design skills and abundant availability of talent are making the country attractive to such companies.

The significant strengths of India in scientific research and development are getting more and more attention. While global research organisations attracted the best talent from the country in earlier decades, now these organisations are setting up facilities within the country. Companies like GE, Intel and Microsoft expanded their research facilities in India this year.

Disappointments on the reforms front
There was not much action on the reforms front during the year as most of the proposals were stuck in the pulls and pressures of coalition politics. Much was expected from the dream team combination of prime minister Manmohan Singh and finance minister P Chadambaram at the centre when it took office last year. Sadly, they have not yet delivered enough to justify their billing as mascots of reforms.

Despite the periodic statements of intent from the government, the disinvestment programme has been put in the back burner in the face of stiff opposition from the Left parties. The BHEL disinvestment almost became a flash point between the government and the Leftists during the year.

Considerable amount of works remain in areas like labour reforms, power sector and pension reforms. The fact that the views of the government and the Left parties have significant differences in all these areas makes it difficult to arrive at a consensus. The opposition party, which should have no ideological difficulty in supporting the government in these areas, is keen on playing the politics of opposition even at the cost of the country's economic growth.

Implementation of VAT was the most significant reform during the year. Contrary to the doomsday prophesies of critics, the implementation of the new system went without a hitch. Even the opposition-ruled states which had initially refused to implement VAT accepted the new system by the end of the year.

Implementation of VAT across the country and abolition of central sales tax will go a long way in creating a unified and vibrant domestic market.

Reaching out to the world
The year was a landmark one for Indian companies as they went in for a large number of acquisitions in key overseas markets. During the second half of the year, such announcements came on a daily basis.

Among the industrial groups, the Tatas were the most aggressive in overseas acquisitions. Various Tata group companies spent nearly $1 billion on overseas acquisitions this year. Some of these acquisitions were sizeable, running into hundreds of million dollars.

However, the confidence shown by the smaller Indian companies in making overseas acquisitions was the most amazing part of the story. Companies in sectors as diverse as pharmaceuticals, IT services, BPO and textiles made strategic acquisitions across the globe to increase their reach.

Though these acquisitions are small by global standards, the Indian corporate sector is learning valuable lessons in the process. Smaller companies are easier to integrate and the experience would enable domestic companies to scale up the size of the deals in future.

Easy availability of capital is making these acquisitions possible for Indian companies. The year saw significant activity in the domestic primary issues market as well as in overseas capital issues in the form of GDR's and FCCB's.

Glitter of the yellow metal
While stock markets were on a bull grip during the year, gold also did not fare badly. The domestic price of the traditional investment favourite of most Indians gained nearly 15 per cent during the year as demand remained strong across the country.

By the end of the year gold prices rose above the $500 per ounce mark in international markets after many years. Increasing prosperity in countries like China and India is fuelling the demand for gold jewellery, driving gold prices on a northward journey.

High prices of gold did not have much of an impact on absolute demand for the metal. Imports of gold into the country rose as compared to the previous year. Higher gold prices had a beneficial impact on the demand for silver. Prices of silver also rose during the year, in tandem with gold prices.

Hot property
The real estate market remained red hot during the year as housing demand from the middle class continued to rise. Relatively stable interest rates and beneficial tax policies for the housing sector announced in this year's budget helped maintain the growth.

Commercial property market saw some significant developments during the year. Parts of the old textile mill land in Mumbai were auctioned at rates beyond all expectations. Companies with significant land holdings became the favourites in the stock markets and stocks of property development companies attracted good interest from investors.

The year also saw the launch of property funds in the country. Well known groups came out with real estate investment funds targeted at wealthy individuals and institutional investors. Large overseas investors made significant investments in real estate companies while institutions like HDFC announced funds targeted at overseas investors.