In fact, the new government, being essentially a coalition of various state-level forces with the BJP, is the epitome of federalism.The other, to mince no words, is a failed state. While in India the democratic process has enabled inclusion of many interest-groups, the sporadic Pakistani democratic experiments have only exacerbated tensions in that country's ruling establishment.

For Pakistan, the situation is nothing short of disaster. The state is practically bankrupt and badly needs loans from the global financial bodies. The coup will undoubtedly lead to rethinking on these loans. Even if they are ultimately forthcoming, there will be some delay. Equally importantly, questions about the relationship of the army and the Taliban raise themselves, and the implications that has for the possible Talibanisation of Pakistan.

For India, the fact that General Musharraf has been the brain behind the Kargil operation obviously leads to discomfort. Add to that the nuclear question. The prices of Indian ADRs and bonds traded abroad have already been affected. While this will very probably be a temporary effect, funds flow to Indian markets could be affected on increased risk perceptions. It needs to be remembered that two of the Indo-Pak wars occurred when the army ruled Pakistan. One fact, however, is clear-it is the army which calls the shots in Pakistan, either openly or behind a thin facade of democracy.