But irrespective of how much the government does from now on, the opportunity lost in areas like power investment, increasing and improving the education throughput, and lowering the cost of doing business (eg. through urban land reform to make office space and housing affordable) have been lost for good.

Also, it is impossible to address all the state-level issues that bedevil business, and of course no one has any hope that government corruption will be addressed. In that sense, there is little that the government can now do to redeem itself in the eyes of all those who had great hopes from the "dream team" that took office in 2004.

The second set of issues has to do with short-term macro-economic management - and here, even if the government wants to do something, it has few satisfactory options in a pre-election year. If the fiscal deficit (correctly calculated) is going to climb to 8 per cent of GDP, and if the current account (on trade) is going to be a record 4 per cent of GDP, then the macro-economic situation is clearly unsustainable. By allowing fertiliser and oil subsidies to mount, the government is destroying both the fertiliser and oil marketing companies.

But reducing subsidies means raising prices, which could result in the inflation rate climbing rapidly from the vicinity of 12 per cent today to 20 per cent. You can imagine the howls of protest that will ensue, and the raucous pitch of the political debate.

Caught between a rock and a hard place, the government watches with apparent helplessness as the country's credit rating is endangered, and as overseas investors pull their money out of the stock market. It might have been able to contain the problem if it had not announced the bank loan waiver, and if implementing the Pay Commission award could be deferred by a year. But both are now facts on the ground. In short, there is no joy when it comes to short-term economic management. What is likely therefore is that the Reserve Bank will continue to raise interest rates to slow down demand. For business, that is not a happy prospect.

The bottom line is that companies will have to manage as best as they can in a situation of macro-economic uncertainty. Fortunately, companies have strong balance sheets, and the investment in power, the transport sector (railways, highways, ports and airports) and in basic industries like steel will keep the pot boiling.

Companies have already seen profits (and not just margins) shrink, which explains the lack of confidence that investors have been signalling. But businesses can continue to grow, which is why no forecast so far has said that the economy will grow at less than 7 per cent this year.