India, it is often said, only reforms in a crisis. With foreign exchange reserves of $163bn, no one in government is panicking, but the sudden flight of foreign institutional investors could be just the spur to action that the government's beleaguered reformers have been looking for over the last two years.

To the frustration of Manmohan Singh, India's technocratic prime minister, the Communist parties that prop up the Congress-led coalition in parliament have long been stalling vital structural reforms, blocking plans to privatise state companies and liberalise foreign direct investment limits in attractive sectors such as insurance.