Government appears to be moving in the right direction to revive capex cycle: The government cleared three major infra projects worth US$5 billion including an electricity generation plant, metro rail system and highway project. Moreover, according to media reports (Business Standard), the government is likely to approve the long debated foreign direct investment (FDI) for retail distribution chains.

In this cycle, reviving growth will be possible only with a push to capex: A further boost to domestic consumption through monetary and fiscal easing in the face of capacity constraints and already high inflation would only intensify the inflation problem. Hence, the government needs to push private investment to revive growth this time.

Counter-cyclical revival in investment trend will be challenging: From an entrepreneur's perspective, the slowdown in demand growth, weak global economy as well as global capital markets, high material prices that hurt margins, a slowing pace of approvals by government machinery, lack of major policy reforms over the last few months, and tailwinds of corruption-related investigations have affected corporate confidence.

David Fuller's view India's economy is crying out for infrastructure development and this should be one of the great growth stories of the next two to three decades. However, given the ongoing inflation problem, the government's preference for private investment is understandable but businesses are likely to be cautious in the current economic environment. FDI for retail distribution chains, while controversial in India, would help to contain inflation.

I maintain that India is one of the best long-term investment stories but it is an underperformer this year, and after 13 consecutive interest rate increases there is a risk that the RBI will keep monetary policy restrictive for too long. That would test the patience for those of us who have investments in India, while creating an opportunity to buy a little more cheaply for those who missed the big advance which commenced nearly a decade ago. When India breaks its medium-term downtrend, defined by the progression of lower rally highs, that should signal a reversal of form to outperformance.