The Indian National Congress-led United Progressive Alliance (UPA) coalition government, headed by the prime minister, Manmohan Singh, can take credit for India's strong economic growth performance, but its political standing is being severely undermined by a raft of corruption scandals and a surge in food price inflation. Furthermore, 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). Internal differences within the coalition will also continue to obstruct the government's reform efforts.

Mr Singh's government faces several challenges during the remainder of its second term, including tackling corruption, bringing down inflation, delivering more decisively on its promise of inclusive economic growth, dealing with an escalating Naxalite (Maoist) insurgency in eastern and central India and managing the uprising in the troubled Kashmir region. Each of these challenges is substantial, and the government is likely to continue to enjoy 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. Mr Singh's reluctance to investigate the telecoms licence auction sooner suggests that his administration is primarily concerned 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 objectives results in fragile governing coalitions, and this factor will persist as a potential source of instability in 2011-15, as the UPA will remain unable to govern without the support of regional parties and those based on caste.

Up until March, it had appeared that the corruption scandals would merely damage the Congress-led coalition government's reputation. However, allegations in March that senior Congress party leaders bribed members of parliament to ensure a favourable outcome in a confidence vote in 2008 have put even more pressure on the government and may threaten its survival. The news is likely to trigger a renewed investigation into the confidence vote. The main opposition Bharatiya Janata Party (BJP) has demanded that Mr Singh resign over the latest allegations, which were made public by a whistle-blowing website, WikiLeaks, but which appear to confirm the BJP's earlier accusation that the confidence vote was bought.

Political stability will vary from one region of India to another. The government is reviewing its counter-insurgency strategy, but the grievances that motivate the insurgents will take years to resolve. Maoist violence is likely to worsen in the forecast period. 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 mid-2010 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 also raising tensions with Pakistan. Political fragmentation and anti-government violence constitute 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 many other developing countries in Asia.