NEW DELHI AND ISLAMABAD, PAKISTAN
When East Asia's tiger economies took a nose dive earlier this year, it was the vindication many Indian economists and policymakers had long been waiting for.
In the tortoise-and-hare race for growth and prosperity, slow-and-steady India looked as if it had edged ahead of its rivals.
India's credentials rested on its firm commitment to economic liberalization initiated by the Congress Party government in 1991 and carried on by the United Front after it came to power last year.
Despite being a loose coalition that included free marketeers and hard-line leftists, the United Front earned praise for its business-friendly budget and its all-out efforts to woo foreign and domestic investment.
Not surprisingly, when Congress used its size and strength in Parliament to force the fall of the 17-month-old government last week, the business community was among the most vocal critics.
The same is true in neighboring Pakistan, where business leaders are calling for reason to prevail in a two-month tussle between the prime minister, the president, and the judiciary that has paralyzed the government.
Overburdened with poverty, crippled by a lack of infrastructure, and tarred with the brush of bureaucratic inertia, the last thing the economies of South Asia need is another political crisis to divert attention from pressing economic priorities.
But from Sri Lanka in the south to Nepal in the north, the governments of the region are finding that instability and investor confidence don't mix no matter how large their untapped consumer markets might be.
"We are losing the image of a potential economy and will meet the same fate as other Asian countries if we do not get the requisite direction and government to get back on the track of economic growth," says Ranjan Nanda, managing director of one of India's largest industrial conglomerates, Escorts Ltd.
More than just the collapse of another South Asia government, the fall of the United Front could put on hold the winter session of Parliament, which was expected to pass crucial reform bills in areas such as taxation, company law, insurance, power, and mining.
Instead, India's recession, with its sluggish industrial and export growth, may deepen if the country's currency keeps plummeting and the stock market continues its roller-coaster ride.
Frightened by the political instability, business leaders are decrying a leadership vacuum.
"What is needed is a strong leader who can provide clear direction and leadership. Unless that happens, we will drift further," warns Onkar Karwar, managing director of Apollo Tyres.
In Pakistan, the political battle between Prime Minister Nawaz Sharif and President Farooq Leghari, which culminated in Mr. Leghari's resignation Dec. 2, has created further economic stagnation and confusion.
"It's a horrible situation. Every day of this crisis is costing us millions of dollars," says Sen. Ilyas Bilour, president of Pakistan's chamber of commerce and industry.
The crisis has brought the country's powerful military establishment to the fore with the armed forces chief of staff Gen. Jehangir Karamat mediating the resignation of President Leghari to avert a full-blown constitutional crisis.
It's an unusual move in a country where the military has repeatedly resorted to coups d'etat to overthrow unruly elected governments. But Pakistan's economic bailout, backed by the International Monetary Fund, has strict conditions attached to it, and a coup would put a stop to the aid flow and damage the confidence of foreign investors.
"I think the military doesn't want to be seen to be interfering. This is good for the country," says Ashfaque Khan, joint director of the Pakistan Institute of Development Economics.
The other countries in the region are not faring much better than Pakistan and India.
In Bangladesh, a strike called by the opposition last week crippled the main port city of Chittagong, just as signs were emerging that the country's main export earner, the textile industry, was beginning to recover.
And in mountainous Nepal, the poorest of the seven South Asian nations, two governments have already fallen in less than a year.
"The governments of the region are well aware of the economic cost of such crises, but in South Asia bad politics still take precedence over good economic policy," says Dr. Khan.