The Indian Cabinet this week is expected to approve and further clarify reforms that would liberalize the country's rules on Foreign Direct Investment. The new measures would reduce red tape and raising the allowed limit on FDI in a dozen different sectors, including telecom, defense, energy, insurance and retail.

Indian Prime Minister Manmohan Singh called a group of senior Cabinet members to his home late July 16 to work on one critical goal: convincing the world that India still deserves its status as an emerging economy and is thus worthy of billions of dollars of investment to sustain the country's economic growth. But India, like several other countries trying to cling to a decade-old reputation as promising, albeit high-maintenance, destinations for investment, is finding it increasingly difficult to cope with a global economic slowdown that has quickly and painfully rebranded the country as stagnant.

After nearly a decade of reporting 9 percent average growth annually, India's economic output has slowed to around 5 percent. While such a pace is envied by many countries even in the developed world today, the downward adjustment for a country like India, which lacks a strong industrial base to weather the slowdown, is much more painful. While millions of Indians remain in absolute poverty, India's much-vaunted middle class — numbering between 150 to 300 million depending on how you define the term — is not inclined to tolerate cuts in subsidies or tax hikes when infrastructure remains decrepit across the country, power blackouts are a way of life and corruption scandals across party, state and national lines continue to disillusion the electorate.

Complicating this picture, the Indian rupee has been on a downward spiral for the past six weeks as short-term portfolio investments have left the country over fears about the country's burgeoning current account deficit. Measuring close to 5 percent of GDP right now, the deficit is likely to continue to swell as exports slow. India faces no good, feasible short-term solutions to lessen its appetite for energy and gold without further compromising growth.

India needs an image boost, and fast. The country has long been trying to pursue a more sustainable path to growth, one that would encourage more stable and long-term capital flows in the form of FDI. But previous proposals to hack through the country's notoriously thick red tape and facilitate foreign investment ran into endless snags as the Cabinet struggled against various politicians, business lobbies and interest groups who are trying to protect domestic industry with harder economic times lying ahead.

Singh and his top Cabinet leaders, however, forged ahead last week and announced a dozen different sectors in which FDI will be liberalized. The more eye-catching proposals announced include a move to expand foreign ownership in the telecom sector to 100 percent (up from 74 percent) and a reform that has captured the interest of defense firms such as Lockheed Martin that would allow more than 26 percent foreign ownership in India's substantial defense market, so long as the investor brings in what the Cabinet called state-of-the-art technology. Major corporations such as Wal-Mart and Carrefour are waiting to find out whether a move to further ease regulations on single-brand retail will extend to multi-brand retailing. The measures are due for Cabinet approval this week, but deep skepticism remains over whether India's investment-friendly image will convince long-term investors, especially given the timeline that New Delhi needs to stem its economic decline when deep, structural problems remain.

General elections are only a year away, and campaign seasons start early in India. While the country's ruling Congress Party is still trying to sort out a succession plan, the controversial and charismatic Gujarat Chief Minister Narendra Modi is set to become a formidable candidate for the main opposition Bharatiya Janata Party. With an intense election season ahead, the Singh government is relying on executive action to move ahead with the reforms, knowing full well that any measures requiring legislative amendments will likely be paralyzed until after the general elections in May 2014. Speaking before the U.S.-India business forum in Washington earlier this month, the deputy chairman of India's Planning Commission, Montek Singh Ahluwalia, urged American investors to believe in the government's commitment to reform, while acknowledging that "policy reform would slip away due to the elections." The Indian government is looking for a swift and strong vote of confidence, but investors already skittish on India are likely to remain skeptical before making any big moves.