(C) Statements I and II are true and II is the correct explanation of I.
Statement I is true — power sharing is good for democracy. Statement II correctly explains this: it reduces conflict between social groups, ensuring political stability.
The textbook (Why power sharing is desirable?, Chapter 1) explicitly states this as a prudential reason: "power sharing is good because it helps to reduce the possibility of conflict between social groups." Statement II directly explains why Statement I is true, making option (C) the correct choice. Don't confuse this with option (D) — here the link between both statements is direct and explicit.