In 2002, Gujarat, a state in the west of India, was home to one of the worst rounds of religious violence the country had seen for decades. The victims were mostly Muslims. In this article, I argue, as others have done, that this violence was a product of the growing influence of a Hindu nationalist agenda at state and national levels. However, I also suggest that the violence emerged from the related patterns of neo-liberal reform which are radically altering the structures of society and governance in Gujarat. Economic and political liberalization has created ambiguous zones between the state and society in which the possibility of religious violence has been incubated, sometimes deliberately, but by no means always so. To demonstrate how I arrived at this conclusion, I examine the creation of images of Muslims in Hindu society and how these images are recreated through the actions of Hindu nationalist organizations and the government. By doing so, I demonstrate how the organizations of Hindu nationalism have set about re-imagining the shape and purpose of the state. Furthermore, by isolating Muslims from economic resources and political representation, the organizations of Hindu nationalism enliven their own foundational myths, which state that the Hindu majority is in need of protection from the troublesome, isolationist and secretive Muslim minority.