The problem, however, is that the BJP has done little to effectively counter this. Its budget, and the backtracking on critical issues such as cutting subsidies, sent horrible signals about whether it was capable of taking tough decisions on economic reforms. It also sent out signalsthat the country was becoming more protectionist. Not taking early enough action to prevent hooligans from burning Pepsi/Coke trucks reinforced this view of a weak and isolationist government.

And while a large number of people were thrilled with the Pokharan nuclear tests, the same can't be said for the way the Government handled the fallout. The point is that while the Government can claim that the sanctions won't have too much of an impact, or that the impact of Moody's downgrading can easily be absorbed, it is the combined effect which is proving to be devastating.

The Moody's downgrade makes interest rates on foreign borrowing more expensive, the sanctions do much the same. By ensuring, for example, that US EXIM bank concessional loans will not be available for Indian projects, investors have either to pay higher rates to commercial banks or look for concessional finance from other countries. Similarly, not allowing OPIC insurance cover to US companies wanting to invest in India means that they haveeither to go to private insurers and pay higher premia, or not invest at all.

Worse, with foreign investors perceiving that the Government is going slow on reforms, they have begun to pull out. Since the budget, they have pulled out Rs 900 crore from the stock markets in May and Rs 510 crore in the first week of June. And since India has now been downgraded to below investment grade, some more FII investors will have to pull out their rules don't allow investment in countries or securities which are below investment grade. In which case, the stock market is certain to fall further. It has already fallen to around 3,100 points which has resulted in shareholders losing Rs 1,62,000 crore in the two months. Interestingly, Prime Minister Atal Behari Vajpayee was quite alive to all this when he came to power a hundred days ago. He saw, correctly, that the way to blunt the impact of the US sanctions was to clear lots of foreign investment proposals. And if some of these were US companies, so much the better sincethey would then lobby with their Government to ease up on some of the sanctions. So, within days of Pokharan, when the Government finally woke up to the need to do something, one heard talk of clearing Air-India's aircraft acquisition deal (of interest to Boeing), of opening up the insurance sector (of major interest to the US), of hurrying up counter-guarantees to the remaining fast-track power projects (again, US companies would benefit). But somewhere along the way Vajpayee hit a major road-block.

The aircraft deal has receded into the background again, opening of insurance to foreign companies remains a question mark and the counter-guarantees appear to have got stuck somewhere again. And while the Government gained brownie points by being pro-active on the Maruti-Suzuki fight, it lost out by failing to take any action on the ICI-Asian Paints fight.

As a result, investors such as those at the two-day Euromoney conference which concluded in the capital on Friday, have already begun talking of how theBJP is ineffective, how it is confusing them by giving out different signals every day. While the solitude, if investors stop flocking in, even if for a while, will be very comforting for some of those in the RSS-Swadeshi Jagran Manch, the same cannot be said for the country's citizens who have seen the economy getting buffeted each day, with wild fluctuations in both the Sensex as well as the rupee.

Pluses