Index trend
Previous Quarterly Editions
Expropriation risk: 54 54 54 54 ► Political violence risk: 57 57 57 57 ► Terrorism risk: 72 74 74 74 ► Exchange transfer and trade sanction risk: 44 35 35 35 ► Sovereign default risk: 47 47 47 47 ►
Overall Risk Temperature: 58 (Significant) TREND ►
Special topic: Political polarization
Polarization has intensified in India along multiple axes: politics, geography, caste, religion, ethnic identity and language. Making a routine practice of what was earlier the exception, the ruling Bharatiya Janata Party (BJP) has used state surveillance and enforcement agencies to intimidate and even incarcerate opposition party leaders across the country. Under the BJP-led Hindu nationalist government, minority communities, especially Muslims and Christians, have been subjected to attack by organizations linked to the BJP and by vigilante groups in Delhi and some states.
Hate speech against minorities rose 74% last year, according to the U.S.-based India Hate Lab research group. Prime Minister Narendra Modi himself has used inflammatory language about Muslim minorities while campaigning in state elections.
Reports of caste oppression have become common, especially physical attacks and sexual abuse of Dalit or ‘scheduled caste’ persons.
Polarization also exists along geographical lines. Political parties representing the interests of individual states, especially in the south where the BJP’s power is weaker, complain that the ruling party is trying to impose its hegemony over decisions and activities that should be left to state governments. State governors, who are appointed by the central government, are aggressively intervening rather than serving as largely ceremonial and titular heads, and even blocking laws passed by state legislatures. The BJP has tried to impose Hindi as the national language, requiring its inclusion in school curricula across states where other languages with long histories are spoken and flourish.
The result of all this has been tensions around multiple flashpoints often leading to violence. An extreme example is the outbreak of near civil war in the state of Manipur, where the violence is seen as having been precipitated by the state government.
The BJP — reduced to a key part of a ruling coalition after the last elections — is increasingly desperate to regain ground, as the opposition, led by a revitalized Congress party, becomes more vocal. This desperation has intensified conflicts, raising the risk of violence.
Expropriation Risk 54 (Medium) TREND ► The risk of outright nationalization is extremely low. There is broad multi-partisan support for a policy framework in which foreign investment plays an important role in driving economic development. Legal safeguards are in place to prevent expropriation without due process and fair compensation.
However, foreign companies have been embroiled in legal disputes over demands for payment of back taxes that can reach very large sums. Recent cases include a demand for $1.4 billion imposed on Volkswagen last September and a demand for Samsung to pay $600 million in January this year.
Political Violence Risk 57 (Significant) TREND ►
Violent ethnic conflict with sophisticated arms in the northeast — especially Manipur state, where paramilitary and military forces have been unable to restore normalcy — have captured national attention despite being in the extremities of a large geographical nation. Combined with intensified run-ins with far-left extremist forces in eastern parts of the country, these developments have kept political violence in the headlines.
In Chhattisgarh, a hotbed of Maoist Naxalite activity, the BJP state government has committed to eradicating Naxalism by March 31, 2026. It claims that the security forces had killed 287 Naxalites since it took office, arrested 1,000 people and facilitated 837 surrenders in one year. There has reportedly been a 73% drop in the number of casualties among security personnel and a 70% decline in civilian deaths compared with the previous decade. Some observers hold that many of the ‘Naxalites’ were innocent civilians killed in staged encounters.
In addition to these localized conflicts, two major trends simmer beneath India’s day-to-day democratic politics that can boil over into violence. The first is the BJP’s effort to weaken the opposition and dominate the political space by any means. The second is the BJP’s promotion of a majoritarian Hindu agenda, which has contributed to communal divisions and enabled affiliated groups to engage in violence and vigilantism, mainly targeting Muslims.
Terrorism Risk 74 (Medium high) TREND ►
In a society with deep hierarchies and multiple violent conflicts, each leaving behind harmed and aggrieved groups, the risk of violent backlash — often from unorganized or leaderless movements — increases. India, as a result, remains vulnerable to both far-left and far-right forms of terrorism. The situation is further complicated by the state’s often heavy-handed response. As the Kashmir experience shows, such an approach may not resolve conflict and can instead contribute to it.
Exchange Transfer and Trade Sanctions Risk 35 (Medium low) TREND ►
There has been recent concern about India’s balance of payments and the rupee’s stability due to the withdrawal of foreign financial capital. For some time, large inflows from portfolio investors seeking high returns created a heavy reliance on foreign capital that can be withdrawn quickly and without warning. These inflows also contributed to a speculative boom in financial markets, which is now reversing. Since foreign reserves reflect liabilities rather than actual earnings, they can be depleted rapidly, putting further pressure on the rupee. This makes the recent investor exit and currency depreciation a cause for concern. If the trend continues, the government could consider capital controls, though the risk remains small for now.
Sovereign Default Risk 47 (Medium) TREND ►
The International Monetary Fund (IMF) puts general government debt at 82.6% of GDP in fiscal year 2024/2025, down from the pandemic peak of 88% in 2021/2022. Given India’s substantial foreign reserves — $676 billion in mid-April 2025 — and the fact that its aggregate sovereign debt is weighted heavily in favor of domestic currency debt, there is no serious risk of sovereign default.