The Costs of Governing India Through Election Cycles

India’s economic story has long rested on the promise of what the country could become. The world’s most populous nation. A young workforce. A rising middle class. A digital backbone sophisticated enough to rival far richer economies. None of that is fiction. But potential, repeated often enough without corresponding delivery, eventually starts to lose credibility. The West Asia crisis did not create these weaknesses. It simply stripped away the comfort of headline growth numbers and exposed how little economic resilience had actually been built underneath. 

The bigger question is why a country with so many obvious advantages still seems perpetually unprepared for external shocks. The answer lies in three connected failures: a political class that treats electoral victory as an end in itself, an economic establishment that has started believing its own talking points, and an opposition too weak to force difficult questions into the public debate. The result is an economy that looks sturdier in presentation than it does in practice.

Governance Calculus
The first failure is complacency. The 2024 general election was closer than the ruling establishment anticipated. For the first time in a decade, the BJP was forced to confront the reality of coalition dependence rather than outright dominance. That moment could have prompted introspection. Instead, it appears to have reinforced the instinct to prioritise electoral consolidation above all else. Since then, the party has operated with even greater discipline as a political machine focused primarily on extending and preserving power. A string of state election victories only strengthened the belief that the formula did not require correction.

Governing primarily to win elections and building structural economic resilience frequently require opposite things. The government held fuel prices steady for two months as West Asia drove oil company losses from ₹6 billion a day in March to over ₹10 billion in April, with West Bengal and Assam going to the polls. The oil ministry called media reports of an impending hike "fake news." The elections concluded; the hike arrived. The same approach has been applied to LPG pricing, where revisions have repeatedly been timed around election cycles rather than cost realities. The household paying more for cooking gas this month is paying for a political calculation made months earlier. This governing style produces sameness: the same people, the same narrative, the same policy instincts, because the formula that wins elections creates no incentive to revisit assumptions. 

The difficulty is that several things are, in fact, broken. In expanding its political footprint, the BJP has also embraced regional actors whose reputations sit uncomfortably alongside its stated commitments to clean governance. When the expansion of power takes precedence over the quality of the company kept, the credibility of the governance project is quietly eroded.

Hubris Problem
The second failure is more dangerous than the first because it forecloses honest self-assessment. There was a time when the Prime Minister himself warned against the politics of unearned handouts; that critique has since been quietly retired. More telling is the disposition at the highest levels of economic management. Commerce Minister Goyal and Finance Minister Sitharaman have both pointed to India's position as the world's third largest economy and to relatively contained inflation as evidence that the fundamentals are sound. Sitharaman has suggested India does not need to go out of its way to court foreign investors, a statement made precisely when FDI inflows had begun to slow and the external account was showing stress. The implicit message is one of arrival: that the world will come to India on India's terms.

The numbers disagree. India's current account deficit is projected to widen to 2.3% of GDP in 2026-27 from 0.9% in 2025-26, according to HSBC. The balance of payments deficit is expected to reach $65 billion, nearly double the previous year. The forex reserve position of approximately $700 billion requires more careful reading once forward contract obligations are netted out; HSBC estimates an additional $30 billion would be needed simply to keep buffers above minimum adequacy thresholds. These are not the numbers of a country that can afford to be relaxed about courting capital. Meanwhile, India has largely missed the artificial intelligence wave that will define the next decade of global productivity. Other emerging markets, some with considerably less natural advantage, are implementing reforms at a pace that is beginning to attract the capital flows India treats as its natural inheritance.

The West Asia crisis has not created these vulnerabilities. It has illuminated them. The surge in crude prices, the rupee at a record low against the dollar, the losses at state-run oil companies, and the rise in cooking oil, LPG, and food prices cascading through every supply chain are consequences of choices deferred during years when deferral was affordable. Now the government asks citizens to consume less petrol, travel less, and buy less gold, framed as economic patriotism. The Prime Minister’s suggestion that people consider working from home to conserve fuel, though well-intentioned, reveals the limits of asking consumers to adjust when deeper structural fixes remain absent. A country of 1.5 billion people cannot reorganise daily life around infrastructure that was never adequately built. The third failure is the absence of a credible opposition. A functioning democracy requires an opposition capable of making governance politically costly when it falls short, while also offering a serious alternative. 

India’s principal opposition parties remain reactive rather than visionary, united more by what they oppose than by what they propose. Criticism without an alternative eventually becomes background noise, and the government has learned to treat it that way. Without the prospect of a credible challenger, there is little pressure on the ruling party to confront difficult questions or spend political capital on structural reform. The country pays for that absence in the current account, in the regulatory environment, and in the confidence of investors it cannot afford to take for granted.

What India needs is not a different narrative about where it stands. It is the honest internal reckoning that asks whether the policies that brought the country to its current position are sufficient to carry it forward. The government has set 2047 as the horizon for developed-nation status. That ambition will not be achieved by managing headlines, deferring price signals until after polling day, or governing on the belief that scale alone does the work that strategy and reform must do. The West Asia crisis is a test. The question it poses is not whether India can manage an oil shock, but whether it has the institutional courage to learn from one.

The views and opinions expressed in this article are those of the author in their personal capacity and do not represent or reflect the views or position of Osborne Partners. Osborne Partners bears no responsibility or liability for the views expressed herein.