More than most world leaders, Indian Prime Minister Narendra Modi must've cheered the end of 2015. The year was an annus horribilis for him, marred by policy paralysis, embarrassing electoral defeats and mounting doubts about how transformative his term will turn out to be. He has a chance to regain momentum in 2016, but only if he's smarter and bolder about pushing his reform agenda.

Last year, voters hammered Modi in elections in Delhi and Bihar, states he'd swept in the 2014 general election. He spent much time and political capital personally leading campaigns in both states -- and worse, backed off tough reforms for fear of antagonizing this or that group of voters. The approach failed miserably, leaving him well short of a majority in the upper house of Parliament. There, opposition led by the Congress Party has stymied his two major legislative initiatives -- to relax rules on land acquisition and to create a goods-and-services tax (GST) to replace the current maze of central and state taxes.

Meanwhile, the economy remains on shaky ground. GDP growth, aided by a sharp fall in oil prices, was officially estimated around 7 percent in 2015, among the fastest globally. But many analysts say a change in statistical methodology last year has rendered growth data suspect. Nominal GDP growth in the latest quarter, measured by the old methodology, grew only 5.2 percent, a marked slowing. Corporate results were dismal in the last two quarters. The stock market, which initially boomed, ended the year in the red as foreign portfolio investors pulled billions out. Exports declined almost continuously through the year, though cheaper imports kept the trade gap in check.

Two things will likely shift in Modi’s favor this year. India suffered droughts in the last two years, so the law of averages suggests a good harvest in 2016. More important, he'll likely gain around 18 seats in the upper house after more favorable state elections in April. While that won't give him a majority, the Congress and its allies would no longer control enough seats to block the two-thirds majority needed for the constitutional amendment authorizing GST. If Modi can win over key regional parties -- and most are already in favor -- he could clinch the GST law this summer. That would be a major boost, ushering in for the first time an all-India market with uniform tax rates.

David Fuller's view

Not many political leaders had a good 2015 but it was certainly a year that pulled Narendra Modi back down to earth.  More accurately, I will add that India’s fractious, rivalrous and unwieldly democracy gave Modi a wakeup call following his highly publicised and triumphal international tours.  I hope his batteries have been recharged because India’s chaotic economy needs a leader of Modi’s experience and calibre to fulfil more of its enormous potential.  

India's Sensex Index has held up better than most emerging markets but it needs to break the progression of lower rally highs to indicate that demand is regaining the upper hand.