Narendra Modi and the Bharatiya Janata Party government may have good reason to feel chuffed about the scorecard at the end of two years in power. India is the fastest growing major economy today with a growth rate of 7.6 per cent, average inflation has been capped below 5 per cent, industrial growth is at 7.3 per cent based on advance estimates for 2015-16, and the farm sector has reported a 1.1 per cent growth in spite of two consecutive drought years. It has not wilted under the fiscal challenge, sticking to a fiscal deficit target of 3.9 per cent in 2015-16 with the hope of bringing it down to 3.5 per cent for this fiscal. Foreign exchange reserves have swelled to $361 billion, the trade deficit has shrunk by 20 per cent to $48.8 billion, and foreign direct investment has risen 29 per cent to $40 billion.

But the numbers mask some uncomfortable facts. Over 41 per cent of the government's non-plan expenditure arises from committed spending: the amount spent on paying back past debts and pensions. With the seventh pay commission report awaiting implementation, it will be a challenge to put a lid on this number. The Make in India programme, which aims to create 100 million jobs in manufacturing by 2022, has not really gained traction. The Modi government has been unable to address two key concerns of domestic and overseas investors: land acquisition and labour reforms. The two subjects have been lobbed to the states which will have to hack their way through a thicket of issues if they can work up the resolve. Tax reform remains big on Mr Modi's agenda. The finance minister, Arun Jaitley, will take another stab at passing the legislation on the goods and services tax in the monsoon session if he can break the gridlock by persuading the Congress to drop its insistence on spelling out the tax rate in the constitutional amendment.

The government is committed to bringing down the corporate tax rate to 25 per cent by 2019, but plans to link it to a rollback of tax exemptions. So far, the government has made little progress in tackling the issue of black money. That could change. The double tax avoidance treaty with Mauritius has been amended to provide for a capital gains tax on transfer of securities from April next year. But the bigger worry will be over the fallout from the introduction of general anti-avoidance rules next year which will attempt to end the menace of round-tripping of funds using elaborate treaty-shopping devices. There are several externalities over which the government has no control that could complicate matters: the global economic slowdown which has deepened worries over the sharp contraction in Indian exports, the American Fed rate hike which seems imminent, and the widely anticipated surge in crude prices.