Take politics. The Congress-led coalition government is battling BJP. The insecurity bodes badly for Congress in its hopes to retain power.

But that insecurity could push voters to a ‘Third Front’, smaller regional parties with charismatic but controversial leaders - like Mayawati - that send shivers down many investors.

"Anyone in power in India has to be worried," said political analyst Mahesh Rangarajan. "Indians walk on very thin ice. There is no social security, job security. A third force may be able to take advantage of this insecurity.”

The decision of Tata Motors to pull out of West Bengal state in October after farmer protests against a factory for its low cost Nano, billed the world's cheapest car, also shocked India.

For all of India's optimism, it was a reminder that the country of sprouting shopping malls still must deal with the more than two-thirds of Indians who live on less than a dollar a day.

HITTING AT INDIA'S HEART

The attacks in Mumbai that killed 179 people in November hit at the heart of India's growth story -- many wealthy hotel guests from politicians to foreign investors that had long touted India.

And if anyone wanted a sign of a dip in middle class confidence, look no further than car sales, which dropped by nearly a fifth in November, the worst fall in eight years.

"That aggressive Indian feeling that 'we are there' has gone," said Rangarajan.

Now the data is increasingly scary. Industrial output fell for the first time in 13 years in October.

... contd.