The world's senior executives, many of whom were slow to recognize China's vast potential, are flocking to India for fear of missing out on one of the last great growth stories. But the country and its economy present a mosaic of contradictions. India is a stable democracy, but an undercurrent of religious and ethnic tension remains. Cities such as Bangalore and Hyderabad are bustling high-tech centers, but Mumbai, the financial and media center, is a confusion of gridlock and slums. Foreign investment is desperately needed, especially to build the manufacturing sector, but India has been painfully slow in opening up many of its markets.

Over the past year alone, McKinsey has talked with leaders of more than 100 multinational corporations that are operating in India, preparing to do so, or wondering if they should. The following questions and answers, based on McKinsey's experience with government officials and businesses across the country, address some of the more common issues they raise.

Will economic reform continue?

The momentum behind reform is irreversible, for it is driven by a collective belief that India must have a strong economy to improve its standard of living, to be taken seriously by the world, and, not...