The Indian National Congress-led United Progressive Alliance (UPA) coalition government, led by the prime minister, Manmohan Singh, can take credit for India's strong economic recovery following the 2008-09 global recession. However, the UPA administration's achievements on the political front have been far less impressive. Hopes that the government would be more effective in its second term (2009-14) than during its first (2004-09) have been shown to be overly optimistic, as indicated by the difficulty that the UPA has faced in passing important legislation. The ruling coalition has been hindered in this regard by the fact that it lacks a reliable working majority in the Lok Sabha (the lower house of parliament) and is in a minority in the Rajya Sabha (the upper house). Moreover, internal differences within the coalition will continue to hinder the government's reform efforts. The recent proliferation of corruption scandals is also likely to weaken the UPA's position during the remainder of its term, as it has undermined confidence in the government.

Mr Singh's government faces several challenges during the remainder of its second term, including bringing down inflation, delivering more decisively on its promise of inclusive economic growth, dealing with an escalating Maoist insurgency in eastern and central India and managing the uprising in the troubled region of Kashmir. Each of these challenges is substantial, and the government is likely to continue to achieve greater success in the economic sphere than in the sociopolitical realm.

Although making more demonstrable progress on fighting corruption has long been a problem for the government, the recent spate of scandals-and most notably that relating to the sale of second-generation (2G) telecommunications licences in 2008-has put a renewed spotlight on the challenge of reducing graft. On the one hand, the government seems acutely aware of the extent to which corruption hurts its international reputation. For example, the chief minister of Maharashtra, Ashok Chavan, was forced to step down in response to a corruption scandal, but because he had welcomed the US president, Barack Obama, to India in November (Mr Obama's first stop was Maharashtra's capital and India's main financial centre, Mumbai), he was not sacked until after Mr Obama had left the country. On the other hand, Mr Singh's reluctance to investigate the telecoms-licence auction sooner is evidence that the government is concerned primarily with keeping the ruling coalition together. The need to focus on governmental stability, potentially at the expense of policy and even ideology, is directly related to the rise of regional and caste-based parties in the past three decades. Alliance-building on the basis of political opportunism rather than shared policy goals creates inherently fragile governing coalitions, and this factor will remain a potential source of political instability in the forecast period (2011-15), as the UPA will remain unable to govern without the support of regional and caste-based parties.

Political stability will vary from one region of India to another. The violent insurgency waged by Naxalite (Maoist) groups across large swathes of central and eastern India is becoming the country's most serious security problem. The government is reviewing its counter-insurgency strategy, but the grievances that motivate the insurgents will take years to resolve. The Maoists operate in India's poorest states, and economic inequalities and land disputes are adding to their ranks. The violence is likely to worsen in 2011-15, and the Maoist threat is on course to eclipse even friction with Pakistan as the Indian security establishment's biggest concern. Other remote areas will also witness continued conflict. Guerrilla groups operate in most states in north-eastern India, seeking secession or demanding their own states. In addition, the security situation in the Indian-administered part of Kashmir has deteriorated markedly since July and will remain volatile.

India faces both domestic and foreign terrorist threats. Further terror attacks could occur in 2011-15, exacerbating domestic sectarian conflict and tensions with Pakistan. Political fragmentation and anti-government violence present serious challenges, but India's democratic institutions are firmly entrenched and resilient, with orderly and generally accepted transfers of power. The risk of political collapse is thus much lower than in most other developing countries in Asia.