POLITICAL STABILITY

Political Stability is defined as a time period during which there is a state of constancy or
steadiness in the governing structure in the country.

There are no internal disputes or opposition from other similar governing structures.

FACTORS / VARIABLES OF POLITICAL STABILITY

There are many factors that play an important role in maintaining political stability.

They are as follows:-

• RULE OF LAW

Political stability is stronger when the rule of law increases.

Lack in of the rule of law leads to a lack of legitimacy and therefore also consequently political
stability.

If the rule of law decreases, the political stability is weakened.

The rule of law has an influence on the political stability because it is an indicator for how well
the executive does its job.

• DEMOCRACY OR AUTOCRACY

The degree of political stability high if there is a high degree of democracy or autocracy.

The biggest changes in the relationship between society and legitimacy are a shift in the political
or social order.

Strong democracies or strong autocracies are best equipped to withstand the changes, and hence
provide political stability.

• ECONOMIC ASPECTS

Political stability is also dependent on economic aspects like economic growth, interest

rates, exchange rates and the inflation rate.
 • TRADE

Trade is also an indicator for political stability, but also a part of economic stability.

A lack of trade does not only mean that there is a lack of production, but would also suggest that
there is a lack of political stability, because political stability is only possible with economic
stability.

Furthermore, trade is an indicator for how developed the society is, if there are certain goods
produced which other countries cannot produce because of their lack of technical advantage.
Trade can also be seen as an indicator of how well the regime is embedded with its neighbors.

• INVESTMENT

Investment is putting money into something with the hope of profit.

More specifically, investment is the commitment of money or capital to the purchase of

financial instruments or other assets so as to gain profitable returns in the form
of interest, income (dividends), or appreciation (capital gains) of the value of the instrument.

POLITICAL INSTABILITY

 Political instability is a situation where by a country is currently going through political

turmoil.

 Political instability is multifaceted and complex character.

 Political instability is multilevel and multidimensional.

 EFFECTS OF POLITICAL INSTABILITY

 Law enforcement weakens

 Economies crumble

 Trade is affected

 Political relations are strained

 Warfare

 Protest

 Riots

PEST ANALYSIS W.R.T POLITICAL STABILITY

PEST analysis describes a framework of macro-environmental factors used in the environmental

scanning component of strategic management.
 POLITICAL FACTORS

 India is the biggest democracy in the World.

 The government type is federal republic.

 Based on English common law :-

• judicial review of legislative acts,

• accepts compulsory ICJ jurisdiction with reservations,

• separate personal law codes applying to Muslims, Christians, and Hindus.

 State politics have been dominated by several national parties :-

• Including the INC,

• the Bharatiya Janata Party (BJP),

• the Communist Party of India (CPI),

• and various regional parties.

 In the 2004 Indian elections, the INC won the largest number of Lok Sabha seats and
formed a government with a coalition called the United Progressive Alliance (UPA)

 Overall India currently has a coalition led government and both major political parties the
UPA and BJP, whichever comes in power.

 The political Situation in the country is more or less stable.

ECONOMIC FACTORS

• ECONOMIC GROWTH

Economic growth is the increase of per capita GDP or other measure of aggregate income. It
is often measured as the rate of change in real GDP. Economic growth refers only to the
quantity of goods and services produced.

Economic growth can be either positive or negative.

Negative growth is associated with economic recession and economic depression.

 • INTEREST RATES 

An interest rate is the rate at which interest is paid by a borrower for the use
of money that they borrow from a lender.

Interest rates are normally expressed as a percentage rate over the period of one year

Interest rates targets are also a vital tool of monetary policy and are taken into account
when dealing with variables like investment, inflation, and unemployment.

• EXCHANGE RATES 

In finance, the exchange rates between two currencies specify how much one currency is

worth in terms of the other.

The spot exchange rate refers to the current exchange rate. The forward exchange

rate refers to an exchange rate that is quoted and traded today but for delivery and
payment on a specific future date.

• INFLATION RATE

In economics, the inflation rate is a measure of inflation.

It is the percentage rate of change in price level over time.

The rate of decrease in the purchasing power of money is approximately equal.

SOCIAL FACTORS

• POPULATION

The demographics of India are remarkably diverse. 

India is the second most populous country in the world, with over 1.18 billion people.

• RELIGIOUS VIEWS AND BELIEFS

Politicians at times follow the policy of divide and rule.

The Indians have a wide range of religions and cultures.

Political stability is disturbed when there are riots and fights due to differences of religious
views and beliefs.

This gives rise to political instability.

TECHNOLOGICAL FACTORS

• R&D ACTIVITY

The phrase research and development according to the Organization for Economic Co-operation

and Development, refers to "creative work undertaken on a systematic basis in order to increase
the stock of knowledge, including knowledge of man, culture and society, and the use of this
stock of knowledge to devise new applications"

•  AUTOMATION

Automation is the use of control systems and information technologies to reduce the need for
human work in the production of goods and services. In the scope of industrialization,
automation is a step beyond mechanization.

Automation helps in increasing output, performance, productivity, etc

This gives rise to economic stability.

As per our previous hypothesis political stability is maintained by good economic stability.

• TECHNOLOGY CHANGE

Technological change (TC) is a term that is used to describe the overall process of invention,
innovation and diffusion of technology or processes.

• OUTSOURCING 

 Outsourcing or sub-servicing often refers to the process of contracting to a third-party.

This helps in increasing employment all over the world.

Outsourcing enhances trade and gives rise to new processes.

• INNOVATION

Innovation is different from invention.

Innovation is any change, modification, alteration in the existing.