Dear ‘Economist’, India's stability is not accidental, but a model of economic governance

When The Economist recently asked, “What explains India’s peculiar stability?”, it raised an analytically significant question. However, the answer it proposed was partial and reductionist. The magazine’s emphasis on fiscal conservatism, low global oil prices, and the expansion of the services sector describes the proximate indicators of stability rather than the institutional foundations that sustain it.

India’s contemporary equilibrium cannot be explained through macroeconomic aggregates alone. It must be understood as a multidimensional construct emerging from a coherent political economy framework that integrates security, fiscal policy, welfare architecture, institutional reform, and foreign policy.

This framework is a product of deliberate statecraft under Prime Minister Narendra Modi. The empirical evidence of the last decade indicates that stability in India has been politically engineered rather than serendipitously achieved.

Internal Security and Political Order

The consolidation of internal security represents the first and most critical dimension of India’s contemporary stability. It is a prerequisite for macroeconomic and social stability. Over the past decade, the Union Government has implemented a Comprehensive Strategy against Naxalism built on dialogue, security, and coordination, replacing the fragmented and reactive approaches of the past.

The results have been striking. Between 2014 and 2024, Naxal-related violent incidents declined by 53 per cent, with the number of affected districts reduced from 126 to 18. Fatalities among security personnel dropped by 73 per cent, civilian deaths by 70 per cent, and 1,225 cadres surrendered while 270 were neutralised as of October 2025.

Parallel to coercive action, the government has emphasised inclusive development and reintegration as instruments of sustainable peace. More than 12,000 kilometres of roads have been constructed across LWE-affected areas with investments exceeding ₹20,000 crore, and thousands of mobile towers, bank branches, ATMs, and post offices have been established to integrate remote regions into the national economy.

The counter-Naxal framework has evolved into a comprehensive model that combines security consolidation, economic inclusion, and social rehabilitation, thereby transforming internal security from a vulnerability into a pillar of national stability.

Similarly, the frequency and lethality of terrorist incidents in Jammu and Kashmir have also decreased markedly. The Northeastern region has experienced a process of demilitarisation and political integration. These trends reflect both operational efficiency and political coherence.

The strengthening of intelligence-sharing mechanisms, modernisation of policing capacities, and the application of calibrated coercion have collectively produced an environment of predictability. The reduction in subnational conflict has expanded the spatial domain of economic activity and restored investor confidence in regions previously characterised by fragility. Stability, in this dimension, results from the institutionalisation of deterrence and the restoration of state legitimacy.

Macroeconomic Prudence and the Credibility Premium

The second dimension of India’s stability is macroeconomic prudence. The fiscal deficit has gone well below 5 per cent in FY2025, even as public capital expenditure has increased more than fourfold. Inflation has remained within the target band of the Reserve Bank of India, and foreign exchange reserves have stabilised at approximately 700 billion US dollars, covering nearly eleven months of imports.

Bond yields have remained below 7 per cent, non-performing assets have declined from 15 per cent in 2018 to below 3 per cent, and India’s sovereign risk premium has narrowed relative to other emerging markets. These outcomes are not merely the result of favourable external conditions; they represent the consolidation of a macro-fiscal discipline that has acquired political legitimacy. The coordination between fiscal and monetary authorities has enhanced policy predictability, while the political narrative of “stability through discipline” has aligned public expectations with prudent economic management.

Fiscal restraint has evolved from an administrative necessity into a political virtue. The capacity to maintain fiscal order while expanding infrastructure investment has created what may be termed a credibility premium in both domestic and international markets.

Welfare Precision and the Digital State

The third dimension pertains to the transformation of India’s welfare architecture. The introduction of the Jam Trinity (Jan Dhan, Aadhaar, and Mobile), combined with the Digital Public Infrastructure (DPI) ecosystem encompassing UPI, DigiLocker, CoWIN, and ONDC, has established a new model of direct-to-citizen delivery.

Over six hundred million beneficiaries now receive transfers directly into their bank accounts, substantially reducing leakages and discretionary control. The impact on multidimensional poverty has been pronounced. According to Niti Aayog (2024), the proportion of the population living in multidimensional poverty declined from 29.2 per cent in 2013 to 11.3 per cent in 2023, implying that nearly 250 million individuals exited poverty within a single decade.

This transformation represents a shift from a patronage-based welfare system to a rules-based, auditable, and data-driven model of governance. The resulting improvement in distributive justice has contributed to social stability by reducing grievance and expanding trust in public institutions.

Structural Reform and Institutional Capacity

The fourth dimension is institutional reform aimed at improving state capacity and regulatory efficiency. The implementation of the Goods and Services Tax (GST) has unified the domestic market and rationalised indirect taxation. The Insolvency and Bankruptcy Code (IBC) has strengthened credit discipline and improved the efficiency of capital allocation. Initiatives such as PM-Gati Shakti and the National Infrastructure Pipeline have institutionalised inter-ministerial coordination and reduced project implementation delays.

The administrative infrastructure has become increasingly digital and data-orientated. Real-time dashboards, e-procurement platforms, and geotagged monitoring systems have enabled transparency and accountability. These mechanisms represent a transition from governance by discretion to governance by design.

India’s reform trajectory since 2014 therefore reflects not only policy innovation but also an improvement in bureaucratic execution. The modernisation of state functions has reduced transaction costs, enhanced policy credibility, and established a foundation for durable macroeconomic and administrative stability.

Pragmatic Foreign Policy and Strategic Insulation

The fifth dimension of India’s stability lies in the domain of external relations. The current phase of Indian foreign policy is characterised by pragmatic autonomy and multi-alignment. India maintains strategic partnerships with the United States, Japan, and the European Union, while simultaneously expanding energy and defence cooperation with Russia and the Gulf states.

This flexible alignment strategy has allowed India to mitigate external shocks. The purchase of discounted Russian crude oil following the Ukraine conflict, combined with deepening trade and technology ties with Western economies, reflects a deliberate diversification of dependencies.

Although geopolitical headwinds persist, ranging from US tariff measures to tensions with China, India’s external orientation prioritises resilience over alignment. The expansion of regional connectivity projects, the Indo-Pacific initiatives, and the institutionalisation of the Global South narrative within the G20 framework have reinforced India’s global credibility. Foreign policy, in this sense, functions as a stabilising buffer that insulates the domestic economy from external volatility.

When analysed across these five dimensions – internal security, macroeconomic prudence, welfare precision, institutional reform, and pragmatic foreign policy – India’s current stability appears as a constructed equilibrium rather than an accidental outcome. Each dimension reinforces the others. Security enables economic investment; fiscal discipline supports credible welfare delivery; welfare legitimacy sustains reform; and reform strengthens diplomatic agency.

This interlocking system of governance has produced a distinctive form of developmental stability rooted in coherence rather than complacency. The underlying political logic is that the state functions as an instrument of national confidence rather than as a site of fragmentation.

Consequently, the answer to The Economist’s question, why India remains stable in a turbulent neighbourhood, cannot be located in exogenous factors or transient macroeconomic trends. It resides in Narendra Modi’s integrated model of governance, which combines centralised political authority with decentralised administrative execution, welfare precision with fiscal discipline, and nationalism with pragmatic internationalism.

India’s stability represents the institutional consolidation of a political project that has redefined both the capacity and credibility of the Indian state.

(The author (X: @adityasinha004) writes on macroeconomic and geopolitical issues. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.)