INR a relative outperformer, implementation of the reform agenda crucial

The bigger issue for INR watchers is the progress of structural reform or lack thereof. In early August, PM Modi agreed to drop clauses from the land bill. Theongoing discord in parliament between Modi and the Opposition also threatens the passage of the tax reform bill in the current session of parliament (which ends on 13Aug). 

These are disappointing developments and will fuel concerns about the timely implementation of key economic reforms. Land acquisition is the single biggest obstacle in attracting infrastructure development and investment in India.

Meantime, the BJP's vision of a unified GST has been described as a game changer. Deferral of both bills is a major setback for the Modi administration and INR. 

"Business sentiment for the coming 1 year and 5 years has already fallen to the pre-Modi level and further decline could prompt reassessment of our INR view. For now, we remain short SGD/INR", says RBC capital markets.