India hopes to remain among the world's top economic performers

In its latest Annual Economic Review, published the day before a closely-watched budget, the Indian Government said it might use record foreign exchange reserves to speed up cuts in import tariffs.

The idea is the latest in a raft of proposals for dismantling the protectionist barriers that long surrounded the Indian economy.

Previously, the government has made the rupee more convertible, lifted some restrictions on foreign investors and given a shove to the sluggish privatisation programme.

It is hoped these measures will keep economic growth buoyant, despite concerns over regional security and a persistent drought.

Something for everyone

The survey is seen as a key indicator of government inclinations ahead of the budget.

Most analysts feel that Finance Minister Jaswant Singh will seek to please in this year's budget, with a range of measures aimed at creating jobs and wealth, and slimming down taxation.

In terms of business-related initiatives, Mr Singh is believed likely to raise caps on foreign investment - currently 26-74% - especially in sensitive sectors such as banking, telecoms and insurance.

Even more importantly, he is likely to speed up cuts in import tariffs, currently among the highest in the world at an average of about 35%.

The Indian economy, once determinedly inward-looking, is increasingly reliant on international trade.

We aim to please

The economic report aims to promote the current government's fresh approach to economic policy.

Mr Singh wants to be seen as business-friendly

Previous Indian administrations - from whatever part of the political spectrum - have tended to be naturally cautious about full-blown free-market reform.

This has left India with an economy that, while successful in recent years, has not made much of a mark on the global stage.

India has also periodically come in for criticism from foreign investors and agencies such as the International Monetary Fund.

The present government of Atal Bihari Vajpayee - especially since Mr Singh became finance minister last July - has been at pains to present itself as business-friendly.

It has also been keen to scale back government spending.

More than 70% of government revenues are spent on public sector wages, pensions and interest payments annually, reducing the scope for investments in critical areas.

Spend less, make more

This last issue could prove crucial in keeping India growing sharply, the government said.

The Indian economy has been among the world's most buoyant during the past decade, growing at more than 7% annually during the mid-1990s, but expansion has slowed in recent years.

The survey said growing government budget deficits could make it difficult to achieve brisk growth again.

"Without fiscal consolidation, it would not be possible to achieve any improvement in the current levels of public investment," the survey said, blaming the budget slippage on the slow pace of privatisation, large subsidies and sluggish tax collections.

Central and state budget deficits are currently around 10% of gross domestic product, far higher than the levels most economists advise.