Now that the mayhem in Gujarat has ended and a potential crisis in Ayodhya has been averted-at least for the time being-the count for another toll must begin. The loss of investment, income, jobs, sentiments and governance-all the basic ingredients of a vibrant economic environment. The blatant breakdown of law and order in Gujarat for 72 hours not only resulted in human casualties but also razed business and properties worth crores of rupees in India's second-most industrialised state. But more damagingly, it heightened the risk of doing business all over India. The headquarters of industry chambers in Delhi were buzzing with calls from anxious foreign investors when Time magazine with a cover story titled "The Bloody India" hit the stands in the first week of March. To the already high cost of doing business in India, such a scare is as good as slamming a No Entry board on prospective foreign investors or showing an exit sign to the investors on the edge. For Indian business the double-whammy of Gujarat and Ayodhya has diluted the little good that Budget 2002 had promised in terms of lower interest rates and some tough reforms in the rural economy.

Sure, economic growth and sentiments weren't exactly roaring before Narendra Modi blundered in Gujarat and the VHP ignited the Ayodhya embers. In fact, most indicators of economic health-sales, demand, employment, exports and GDP-touched their lowest levels in January this year. And that's the point: having bottomed out, the economy was widely expected to start recovering. Some early signs were visible too. Privatisation, for instance, had got going after 10 years of false starts, and that, by enhancing the values of public-sector companies, was driving a recovery in stock markets and sentiments. All that is stalled now and nobody knows for how long. Amid fire-fighting in Gujarat, tightrope-walking on Ayodhya and pondering over the defeats in the February elections, the Atal Bihari Vajpayee Government has no time for governance. None of the three big-ticket privatisations scheduled for March will take place within the deadline; the Parliament debate on Budget 2002 hasn't even started, and desperate to please his populism-hungry partners, Vajpayee may unravel part of the budget by rolling back some subsidy cuts. The already tough road to recovery has been made more treacherous.