PRIME MINISTER Indira Gandhi, who relaxed her dictatorial powers over India to permit a return to free elections, has now lost her seat in Parliament. Her Congress Party, which has ruled India through the entire 30 years of its dependence, is in danger of being beaten by a four-party Janata (it means People's) coalition. These developments reflect a reversal undreamed of just a few months ago. Sri Lanka seems to be the only Afro-Asian country on record in the postwar period in which the ruling party was turned out in fair elections and that verdict was sustained. But India, the "world's largest democracy?" It boggles the mind.

Any such outcome would be the responsibility, of course, of Mrs. Gandhi, iron-willed 59-year-old daughter of post-independence India's first prime minister and a woman whose declaration of "emergency" in June 1975 was widely hailed as a draconian-and well night irreversible-act. Her surprise decision two months ago to let some thousands of her political rivals out of jail so that they could challenge her in parliamentary elections was attributed at that time to her confidence that she could restore her democratic luster without serious threat to her power. But her opponents, no doubt as much to their surprise as to hers, united and were joined by key defectors from Congress. Crying "Democracy or Dictatorship," they evoked what turned out to be the deeply rooted democratic instincts of the Indian people. They played successfully on the accumulated grievances of the emergency period, including Mrs. Ghandhi's unforgivable indulgence of her son and intended political heir, Sanjay. She replied with the slogan "Stability or Chaos" but, despite the formidable advantages of incumbency, she was on the defensive throughout the campaign.

The irony and the tragedy of India, of course, is that both slogans have a measure of validity. If Indians have shown that dictatorship is not their preferred political style, then there are grounds to fear that the Janata opposition, if it comes to power, will have immense difficulty governing India. It is an untested, ideologically diverse coalition united only in opposition to Mrs. Ghandhi's personal rule, and it would seem to be vulnerable to the substantial centrifugal loosely even in the best of times. So whether a democratically elected opposition could muster the necessary sense of national purpose, and could stay democratic, must remain an open question.

For the time being, however, Indira Ganhdi's experiment in re-democratization ought to be respectfully received. In neighboring Pakistan, uncertainty has mounted in the wake of the opposition's refusal to accept the allegedly rigged results of elections that returned a handsome parliamentary majority to Prime Minister Bhutto. Mr. Bhutto promptly proclaimed a state of emergency, and arrests and riots are unfolding. India is hardly past the point of considering a similar response, but it is not too soon for other nations to consider whether they have a useful role in encouraging Indian democracy and, specifically, in nourishing the economic conditions in which it might better grow.