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More Judiciary Education YourTurn Work With Us Campus Voice

The Modi paradox in 2026. Complete political domination alongside worsening economic slide

Depending on which cut-off one picks, the overall investment rate in India since the rise of Modi has basically been quite flat or has even slightly declined.

The realm that is the intersection of politics and economics is encountering a weighty paradox in India. The Modi government is exercising mastery over the political domain, but the problems of the Indian economy are growing worse. The chasm between increasing political domination and deepening economic frailties may not be bridgeable without serious reform.  

After the recent Assembly elections, the Modi government is now at its strongest since 2019. The conquest of West Bengal means that BJP rules 21 states of India, by itself or in coalition. Only seven states are with Opposition parties.   

For all practical purposes, BJP’s decline in the 2024 Lok Sabha elections, when it lost 63 seats, has been reversed. The party’s ruling presence now covers an estimated 75 per cent of India’s population. Politically speaking, the Modi government could not be happier.

But economically, the sliding national fortunes are also becoming markedly clear.  This may come as a surprise to those who only pay attention to the economic growth statistics. 

Decline in private investments

In recent years, India has had an average growth rate of roughly 6-7 per cent annually, which is among the highest in the world. The crisis in the Middle East will almost certainly bring the rate down, as the costs of energy imports rise. But India has enough foreign exchange reserves to avert a 1991-like external crisis.  

Recall that India’s dollar reserves in July 1991 could only cover two months of imports, and the country was exporting very little. An economic stabilisation agreement with the International Monetary Fund (IMF) had to be signed. Even if the war in Iran lasts longer and the Strait of Hormuz remains closed, India is unlikely to go to the IMF for a bail-out package.

What then is the nature of the crisis? It has to do with private investment, both foreign and internal. Only $3 billion of net Foreign Direct Investment (FDI) came in the first nine months of 2025-26. The........

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