In a sharp commentary on the political climate in India, the global ratings agency, Moody’s, warned last week that sectarian divisions and attacks on dissent were causes of concern for the country’s long-term economic capabilities. While the agency left India’s credit rating untouched, it suggested that the political risks associated with investing in India were growing. That should serve as a red flag for those in the corporate world who have argued that violence against ethnic and religious minorities, majoritarian politics, and an erosion of democratic practices do not directly impact the economy. Moody’s usually steers clear of assessing political risks in countries. While the Narendra Modi government might be tempted — as has been its response to any perceived global criticism — to push back against Moody’s assessment, it would be better served to take heed of the cautionary message from an agency whose ratings matter to the investors New Delhi wants to attract. The note from the ratings firm is also a reality check on just how fragile the image of Indian democracy is globally. Finally, it is a reminder that efficiency in governance, while critical, is meaningless if it comes at the expense of democratic processes.

These are important things to keep in mind for a nation that has, far too often, confused electoral majorities with democratic stability. Electoral dominance has quite often corresponded with division and sectarianism in the Indian polity. Mr Modi’s decade in power has been marked by a politics of polarisation that has left the country with deep wounds. By contrast, India’s greatest period of economic growth — from the mid-1990s through 2014 — occurred under coalition governments. If the lack of a massive mandate served as a check on the worst instincts of ruling leaders, it helped India grow without splitting apart. And this is not a history lesson alone. India has in recent years struggled to increase its foreign direct investment as a fraction of its gross domestic product, which, in turn, has hobbled its efforts to emerge as an alternative manufacturing hub to China. While some of that might be due to factors outside India’s control — such as the Covid-19 pandemic — the Moody’s report reveals the global unease over the country’s politics. Indeed, India’s strongest sales pitch to international investors is the stability of its multi-party democracy that is distinct from China’s authoritarianism. Blurring those lines can only hurt the Indian economy.