New Delhi, Dec 31: From relative obscurity not so long ago, India found itself taking the global centre stage with its enterprises essaying epic deals that redeemed a nation's honour but it could not build consensus at home on moving ahead with economic reforms.

The year 2007 threw exceptional challenges before the government - high inflation, excess foreign funds inflow, threat of overheating - but none that could not be overcome. However, nothing compares to Tata's conquest of Anglo-Dutch steel maker Corus, which includes the remnants of British Steel - a company that tried to thwart the Indian firm's attempt at making the alloy a century ago.

The country, which this year celebrated 60 years of independence from the British, established itself as a global force without whose agreement the world trade talks would remain incomplete. But within the country, there was no agreement between the government and its Left allies on economic reforms, be it opening up the financial sector or liberalising FDI in retail sector. They also did not see eye-to-eye on the Indo-US civil nuclear deal.

The deal aims to give India access to American nuclear fuel and equipment to help meet its soaring energy needs, but the government's key Left allies are fiercely opposed to it, contending that it would compromise the country's sovereignty. The deal, known as the 123 agreement, almost brought down the government - speculation about which caused a huge crash in the stock market.

Despite the one too many political storm, the economy remained resilient. Tax collections touched a new high and monetary and fiscal measures brought inflation below four per cent despite international crude prices surging to nearly 100 dollars a barrel - a great achievement for a country that imports 70 per cent of its oil needs. The catch, however, is that the oil price hike is yet to be passed on to the Indian consumer.

India, growing at a pace next only to China, managed to clock nine per cent for the fourth consecutive year, with investments continuing to be ahead of consumption in driving economic expansion.

Investments increased 20 per cent from last year's level, but the country needs some more reforms if it were to continue to grow by 9 per cent and above. In fact, the 11th Five Year Plan that envisages an average growth rate of nine per cent in the five years till 2012 and 10 per cent growth in the terminal year of the plan was approved by the National Development Council only this month. Many termed the target a daunting one.

But the Planning Commission and the Finance Ministry had done their quick calculations - the rate of investment at 35.1 per cent of GDP was more than rate of savings ( 33.8 per cent), good enough to fuel GDP growth. Nevertheless, for investments to grow, further reforms are a must.

"Reforms would ensure that the growth momentum is maintained, tax revenues go up (allowing the government) to allocate more money for social sector development," Finance Minister P Chidambaram had said in September.

The reforms relate to increasing Foreign Direct Investment in insurance sector from 26 per cent to 49 per cent and increasing voting rights of foreign players in domestic banks, among others.

Lack of movement in liberalisation gave rise to apprehension among trading partners, especially the US, about India's commitment to creating a level-playing field. India enjoys a trade surplus with the US, meaning it exports more than what it imports from that country.

The trade in services sector related to IT alone amounts to about USD 7 billion.

The year also saw the US and the European Union taking India to the World Trade Organisation (WTO) to remove additional customs duty (ADC) on imported wines and liquor that ranged between 150 per cent to 550 per cent, forcing New Delhi to relent.

The US and EU kept seeking access to India's financial services market and New Delhi (except the government's Left allies) also believes that reforms will also help Indian businesses go abroad, complete acquisitions and set up facilities overseas.

Not just Corus, Indian companies spent a good part of the year looking for potential takeover targets, launching bids and executing deals. At the turn of the year, Tata, one of he most reputed Indian business houses, was pursuing a bid for Land Rover and Jaguar - two British luxury car brands. In a strange way, one could see history repeating itself - In early 17th century the British came to India under the guise of East India Company and now it was Indians who were landing in their soil to run businesses.

Vijay Mallya-run United Spirits too knocked back a big one - Scottish whisky company Whyte & Mackay. As a matter of fact, outbound investment from the country was much more than the incoming FDI. Mallya also acquired control of budget carrier Air Deccan back home.

Jet Airways completed the acquisition of rival Air Sahara. In short, the corporate sector was rolling in money. The huge profits, growing markets and ever increasing demands saw many of the leading entities jumping into areas that were traditionally considered the domain of the public sector.

One could virtually read in newspapers on a day to day basis about how intense the race was for various projects be it roads, rails, ports or power projects. Besides, major global players in steel, oil and finances were working constantly on their India strategy to grow bigger and share a pie of the success story of the giant that is finally waking up from its slumber.

While better tax compliance, stable prices (in the second half of the year) and the industry's good showing gave the government the comfort level, it was cemented by the reversal of the trend in the agriculture sector, although the government had to import wheat for the second year in a row.

This was primarily due to poor procurement policies, including support price provided to farmers. Generally, burgeoning services sector, particularly the ITes, financial and banking services and telecom, gave the Prime Minister the confidence that the economy would certainly grow by double digit figures in the 11th Plan period.

This growth story also became the cause of a headache to the government. The headache was, in fact, in plenty --- India found it very difficult to manage its burgeoning forex reserves of 272 billion dollars, causing the rupee to appreciate and making exports uncompetitive.

The rupee rose 15 per cent in a year, causing heartburn to the exporter community but made imports cheaper and greatly increased India's purchasing power. It also catapulted India into the league of nations with over a trillion dollar economy.

Attractive returns from the Indian markets were also a reason for the huge flow of capital, even though the origin of some of them was anonymous. The Indian stock market rose 7,000 points during the year - from 13K to 20K - but proposals to curb investments made through derivative instruments like Participatory Notes caused the bourses to tank. But it is still counted among the most attractive for investors as well as companies looking to raise funds. At last count, there were 50 IPOs waiting to be launched, including one from Anil Ambani group company Reliance Power and Future Capital of retail czar Kishore Biyani.

Although the purchasing power of India's 300 million strong middle-class increased greatly, they never really had the choice of where to spend. That was because the government, under pressure from the Left, kept the retail sector virtually out of bounds of foreign players. FDI in multi-brand retail was still a no-no. But this year, it was not really about letting FDI or not, it was about the fight for turf between big and small retailers.

Some states decided to play the champion of mom and pop stores by ordering the closure of corporate-run western style food re tail stores. Uttar Pradesh, which barred operations of Reliance Fresh - the food format stores of Reliance Retail - ordered a study into the impact of organised retail on traditional 'kirana' stores in August. Not much later, the union government commissioned its own study, the findings of which are expected in the new year.

Though RBI's monetary policy helped manage core inflation (minus food), the general priceline remains a major worry for the administration in the year ahead. While the headline inflation based on wholesale price index eased to a five-year low of 3.45 per cent, the inflation of primary articles is over 7 per cent and within that, food hovered above five per cent, which is a worrying inflation.

Similarly, the interest rates too have remained hard, both on the public as well as the corporate sector, and if it continues could lead to a slowdown of the economy. Hardening interest rates were aimed at checking the galloping property prices and in general, overheating of the economy. Credit off-take has since cooled and with that objective achieved, it is only prudent that the central bank as well as the government work toward stimulating consumption while continuing to monitor individual sectors for signs of danger.