The Congress party held a large rally in Delhi last weekend at which the PM, accompanied by Rahul Gandhi and the Finance minister, for the first time claimed a reformist mantle for the party. The parliament will convene for its next session at the end of the month. Congress is going to have to stand firm on the policy actions it took after the close of the last session. In December, we will see state elections in Gujarat which will probably see the return of first minister Modi and propel him into the national leadership of the BJP. This holds the prospect of galvanizing the opposition at a national level and offering voters a real choice in the elections which are due in 2014. This will be far preferable to a fractious collection of state level parties dominating the campaign with local interests. It is worth recalling that the BJP, during its period in office which ended in 2004, oversaw the last period of substantive reform in India.
In the short-term, we depend on the Finance Minster sustaining sentiment with investor-friendly policies until the RBI decides it can ignite the next monetary easing cycle, probably in the next quarter.