A sudden change in the buying habits of people shopping at Big Bazaar stores might be a tell-tale sign of the country's improving economic situation. In the past one week, according to Future Group CEO Kishore Biyani, more people are picking up high-value items such as furniture, kitchen goods and electronics. What does it mean? "Consumers are more confident about the future than before. The consumer sentiment has improved after a long period of slump," says Biyani.

India's economic environment worsened last fiscal year due to slowing growth, a wide current account deficit, a weak rupee, and high inflation. The situation has improved over the past few months, with the current account gap narrowing, inflation easing and the rupee strengthening, making the next government's task much easier. In April, for instance, inflation based on wholesale prices fell to 5.2 per cent, a half-point drop from the previous month. Similarly, the current account deficit shrank to 1.7 per cent of GDP in 2013/14 from 4.7 per cent in 2012/13.

However, risks to current account deficit and inflation remain. The Reserve Bank of India's recent decision to ease restrictions on gold imports could again exert pressure on the current account deficit. Also, expectations of deficient monsoon rainfall due to the likely impact of El Nio - a weather phenomenon that could cause drought - could jack up already-high food prices.

Some experts think otherwise. "The impact of El Nino will be muted," says Vinay Khattar, research head at Edelweiss Securities. Ratings firm CRISIL says in a recent report that only two of seven El Nino years in India since 1991 experienced drought. "[It] suggests a nearly 30 per cent chance of an El Nino condition morphing into a monsoon failure."

Another factor working in India's favour is the economic revival of its two biggest export markets - the United States and Europe. In addition, India is likely to get a higher proportion of foreign funds as compared to other emerging economies. "Most competing economies - China, Thailand and Russia - are going through some sort of political or economic turmoil," says U.R. Bhat, Managing Director at financial services firm Dalton Capital Advisors.

Critics argue that ground realities have not changed much and the upbeat mood is driven mainly by hype. Dabur's Duggal, however, disagrees. "The hope is backed by strong credentials of the new prime minister [Narendra Modi], which wasn't the case in 1977 when the Janata Party came to power. Its hype was not supported by a performance track record," he says.

According to the BT-C fore survey, 88 per cent respondents are willing to make fresh investments in the next two to three quarters, and 97 per cent expect consumption to pick up in three months. To some extent, fresh investment is dependent on inflation, and therefore, the movement of interest rates. As long as interest rates remain high, new projects will not materialise quickly.

Bhat says the government needs to take all tough decisions in the first year. "Before the state elections begin, the new government can look into several key areas on an urgent basis," he says, and suggested removing supply-side bottlenecks to tackle inflation. "Since new projects from the private sector will take at least six to eight quarters, the government can expand the fiscal deficit to stimulate the economy by launching new projects on its own," he adds.

Clearly, the new government has its task cut out. A wobbly economy needs more than just band-aid fixes, especially when the expectations are sky high. The BJP made many promises before the elections. Now is the time to deliver on those promises.