Democratization literature points out that democracy has often broken down in poor (Prezworski et al 2000; Lipset 1959; Huntington 1968) and diverse (Horowitz 1985 and 1994; Gurr 1993: Synder 2005; Puddington 2015) societies. Exacerbation of conflict over resources between different classes in poor countries and conflict over recognition and identities among different cultural groups in diverse societies have posed double challenges for sustaining democracy. However, a few diverse and poor countries have been able to overcome the double challenges to sustain democracy (Kohli 2001; Picard 1987; Sandbrook et al. 2007). This paper asks the question: when do poor and diverse countries avoid breakdown of democracy? Specifically, based on literature review of countries where democracy has sustained and broken down, it asks whether accommodative institutions and policies enable diverse and poor countries to avoid breakdown of democracy (Lijphart 1977; Chandra 2005; Prezowrski 2008; Reynolds 2002). It attempts to answer the question by comparing five poor and diverse South Asian countries with three set of democratic outcomes – India, where democracy has endured; Nepal, Pakistan, and Bangladesh where democracy broke down multiple times and Sri Lanka where democracy has sustained but with considerable erosion. The study will employ a structured, focused comparison by asking a same set of questions in the five countries (George and Bennett 2005; Landman 2013; Lijphart 1971), such as did the countries adopt multiple accommodative or non-accommodative institutions and did they formulate and implement expansive or weak pro-poor policies? Did those institutions and policies contribute in the breakdown, erosion or sustenance of democracies in the respective countries? Comparing countries from the same region with similar socio-economic and cultural context but with different political outcomes (dependent variable) and same independent variables (political institutions, policies) with different values would allow rigorous analysis of causes of breakdown, consolidation or erosion. It allows identification of factors that exist in successful cases but not in failure cases (King et al. 1994; Bradly and Collier 2010). The paper will investigate whether India adopted different set of institutions and policies than Sri Lanka, and Nepal, Bangladesh, and Pakistan to tackle the challenges posed by poverty and diversity. The study draws upon fieldwork in the five countries over the years, secondary literature, and empirical data from datasets on democracy, welfare expenditure, press freedom etc. The paper will argue that multiple accommodative as well as non-dominating institutions and pro-poor policies that did not threaten the wealthy allowed India to overcome the challenges posed by poverty and diversity and in avoiding breakdown of democracy whereas non-accommodative institutions and weak welfare policies contributed to breakdown of democracy in Bangladesh, Nepal and Pakistan. On the other hand, extensive welfare policies prevented breakdown of democracy in Sri Lanka by diffusing the class challenge but non-accommodative institutions led to a protracted violent ethnic conflict that eroded its democracy.