The government's daring decision to set the economy right with a slew of reforms, such as opening the retail sector to foreign investors, will have to face a decisive test in parliament this week as the ruling Congress recently bowed to the Opposition's pressure in agreeing to a vote.

Manmohan Singh-led government's decision to agree for voting on the economic reforms programme put an end to days of deadlock in parliament. The development cheered investors; shares jumped to their highest in around 19 months, while the rupee gained strength against the dollar.

For the time being, investors are seeing signs of a replenished policy momentum. However, a defeat for the ruling Congress party in the parliamentary vote could see Indian shares as well as the country's currency to tumble.

While the government's economic reforms programme does not require parliament's approval as the voting will be non-binding, a defeat would definitely be embarrassing for the government and the pressure on the government to cancel the reforms will get further intensified.

Opponents of the economic reforms argue that any such move would hurt small retailers and throw millions of people out of jobs.

But, economists have long been stressing that the reforms are just inevitable if the government wants to bring the Asia's third-largest economy back on the path of strong growth.

Jyoti Narasimhan, principal economist at IHS Global Insight, said, "Sadly, India's reform needs are greater than its political system's capacity to deliver at the moment, and policy implementation uncertainty remains a key risk."

The government allowed foreign investment in the domestic multi-retail sector in September as part of its measures to revive the country's investment climate by avoiding a looming downgrade in credit rating and cutting a widening fiscal deficit.