New York, Oct 17 (IANS): Asserting that there was a huge anti-incumbency mood against India's ruling coalition, BJP leader Arun Jaitley said next year's general elections will be about leadership and governance issues.

"The two broad points of the 2014 general elections would be the leadership potential (of the Bharatiya Janata Party and the Congress) and a huge anti-incumbency mood against the UPA (United Progressive Alliance)," he said at the International Peace Institute here Thursday.

"It is a strong battle between a dynastic democracy (read Congress) and a more structured arrangement (read BJP)," said Jaitley, the leader of opposition in the Rajya Sabha.

Referring to the Congress, he said "in a dynasty, the strength of the party is in relation to the ability of its current leadership".

"There is a strong anti-incumbency mood emerging ... this is happening after 1977 and 1989 when governments with majority lost elections."

Jaitley said the 2014 polls would be all about governance issues in all states except Andhra Pradesh where the decision to create a separate Telangana would rule over any other issue.

Speaking about major challenges faced by the Indian democracy, Jaitley highlighted need for political reforms, Maoist problems in tribal region of central India, lack of infrastructure development in northeast, poverty and terrorism.

Calling the issue of terrorism a serious problem, he said: "India has also been a target of cross-border terrorism and a lot of our resources have been spent on both these problems."

Noting that thousands of soldiers are killed in tensions across the Line of Control in Jammu and Kashmir, Jaitley, without naming Pakistan, said "dialogue and terror cannot co-exist."