Perhaps the single most important issue in Indian economic policy is the task of getting the State to focus on public goods, and improving the quality and quantity of public goods that get done. If you're interested in these issues, you must read the recent report Inclusive growth & service delivery from the World Bank. It looks like a daunting 150-page report, but it is replete with insights on how to get the State to deliver results, or how to address the principal-agent problem between citizen and State. The report was prepared by a team led by Rinku Murgai, Lant Pritchett and Marina Wes.
For a `modern Indian government' perspective on a mostly correlated set of issues, the new `Approach paper on the 11th plan' is well worth reading. Ila Patnaik wrote two articles on this approach paper: [link], [link].
In the case of both agencies (World Bank and Planning Commission), I was quite pleased at the extent to which the two reports break new ground with respect to the tired old thinking. In both cases, the authors shrink from the full ramifications of the ideas. I still think it's a fine start for a process of reinventing government.