1-2%-point vote share could make key difference for BJP

Over the last 20 years, Ruchir Sharma, investor and best-selling author of Democracy on the Road, The Rise and Fall of Nations and Breakout Nations has been on road trips across India during every major assembly and general election. He and his journalist friends come back from these trips with a good sense of what is happening on the ground, and with predictions of how the election will turn out. This year, Ruchir’s group went to Uttar Pradesh and West Bengal. He shared his findings in a conversation with DH Editor Sitaraman Shankar.

The transcript:

Q: I’ll start by asking you a little bit about your 28th road trip, the one which you just made and got back from a couple of days back. Can you tell us where you went and give us some high-level findings, what you saw?

A: Sure. So the basic template of our trips is to spend a week on the road, and of course there is so much to cover in a national election. For instance, when you go towards the later stages of it, when things really heat up, you go to areas which you think are really critical in determining the outcome. So this time what we decided to do was to go to West Bengal and to Uttar Pradesh. So we flew into Kolkata, spent a couple of days around Kolkata and then we had to leave Kolkata a bit prematurely because of the cyclone, which shut the airport down and then we went to Uttar Pradesh where we did an entire roadtrip, beginning in Lucknow and all the areas around it and ending in Varanasi.

Q: So, what did you see?

A: I can't remember a time when India has been this polarised. And I think it's this polarised at every level. At a caste level, at a religion level, at a region level… you either love or you hate Modi. That's the typical emotion you get in most parts of India. In terms of region also, I think that in the South, a very different election is being fought where the national parties in many places are just not even existent, as I write in the book. And I remember, even in 2016, going on those trips and people asking "Modi who? Rahul who?" in many of those states, so you have that sentiment. And then as I said, obviously at a religious level we have seen a lot of polarisation and in UP in particular, at a caste level. Now we've always known Uttar Pradesh is the typical Indian state which follows that old line in Indian politics that "people don't just cast their votes, they vote their caste". But in Uttar Pradesh, this time I found that the caste lines, to be even, if that were possible, more sort of hardened than in the past. So, on this trip all you needed to do was ask a person what was their surname, and on the basis of surname, you knew exactly which way this person is going to vote.

Q: Give us an example of that, it's quite interesting.

A: Yeah. If you asked any Yadav or any Jatav, which is Mayawati's sub-caste among the Dalits, or any Muslim, that person would tell you only good things about the Mahagathbandhan, which is the alliance between the Samajwadi Party and Mayawati, basically, in Uttar Pradesh. On the other hand, if you asked any Brahmin, Thakur, Baniya, shopkeeper or or the non-Jatav Dalits or non-Yadav OBCs, they would praise Modi like hell, in terms of "he's done so much" or "how strong he is as a leader and that's what we need". So there was no objectivity left about the facts: If you ask people about the facts, what people would say, in turn, depended really on their political leanings and their caste. So the people who are in favour of Modi and the BJP government would point out all the good work he's done from building the toilets, more electricity, better roads and obviously the strongman image and that's what India needs at this stage. Speak to the Mahagathbandhan supporters and they tell you exactly the opposite: the toilets don't function properly, the water connection's not given out here, the stray cattle are destroying our crops. So it's like two camps with an alternate reality.

Q: So like two separate countries.

A: Yeah, two separate countries, but more than that I'm saying that the objectivity is lost.

Q: So would you say this is the nastiest election you've covered?

A: You know, we always say that with every election, I feel, that given the progression of media, social media that every election feels nasty, so it's very hard to say "nastiest". But yeah, most polarising? Yes. And also in terms of the other thing, which also in this election we found that it was very hard to find swing voters, that of people who voted for Modi last time 99% say that they're voting again and the people who didn't vote for him, I didn't find who's converting the other way, either, at least in Uttar Pradesh. And West Bengal, it's a bit of a different issue because what's happened there is very interesting, which is that I can't remember a state, a major state, at least, where one party has disintegrated so quickly. After ruling for 34 years, the Left has been virtually blown apart in West Bengal. How did that even happen? You know, like, even as late as 2010, it couldn't be fathomable to believe that you have a West Bengal without the Left and that's happened. On the other hand, the BJP has surged out there. There's a saffron surge taking place in West Bengal and the BJP's voteshare might even top 30%. That's amazing in terms of what's happened and I think that's telling you a lot about this election, that it's really a state-by-state election. You got to analyse it state by-state. In the previous election in 2014, we could sit there and broadly we knew there was a Modi trend. In the end, that it ended up being a wave was a surprise but it was broadly accepted that it's a Modi surge taking place. In this election, you’ve got to go state-by-state and come up with your numbers and what will happen, and even that, I think, is fraught with so much risk. When the people keep talking about numbers, the BJP supporters will again tell you that they're getting, you know, 250-plus for the BJP alone. All the people who don't like the BJP will tell you numbers below 200. Again, I've not seen such a wide range of outcomes as is being presented this time.

Q: Is there any talk of the substantive issues on the streets? Is anybody talking of jobs and prices, the usual stuff?

A: Talking of it through a political lens. So, the people who don't like Modi will point out to you that nothing has been done, whether it's jobs or prices of crops. People who like Modi will sort of say, "there are issues but there is no one else out here and we need someone out here rather than even more chaos with a whole bunch of regional characters". So, as I said, it is in a way an issue-less election and even I think the BJP's campaign is to make it more about emotive issues, you know, harden the attack against the Gandhi family or against Pakistan.

Q: So I think the simplistic view is that the BJP polarises along religion and Congress and the others polarise along caste. Is that right?

A: Not really, I think that's a bit too simplistic, because as I said UP, it's very much along caste lines. If it was just Hindu-Muslim, it would be very different, right? So yeah, in terms that the Muslim vote has been polarised completely, but on the Hindu side, at least in states like in Uttar Pradesh, it's cut into half because you have one half this way, one half the other way. It's not as if everyone is voting along religious lines.

Q: Stepping back a bit, how do you think we came to this pass, this polarisation. It's obvious when you hear some of the speeches, that it's been a conscious thing. How do you think this sort of polarisation is achieved and where will it lead?

A: I think because India is such a diverse country, such a heterogeneous country, I guess it's waiting to happen. Some will argue this was always the case, what has happened now is that the intensity has become much greater and that in the past, when the polarisation happened, it happened in a way where it was Congress and anti-Congress. Now it's basically more BJP and anti-BJP at least in most parts of the north and the west of India. I think that's what happening, but I do feel that this is a global phenomenon. Stepping back to America, there's an equal amount of polarisation there between the Democrats and the Republicans. Polls show that if you look at the support for Republican presidents now, it's bascially non-existent among the Democrats. Thirty years ago, about 30% of Democrats would also support a Republican president; the question of that happening now is zero and vice-versa, there's no Democrat president finding support amongst any of the Republican constituencies, so it's just incredible polarisation and I suspect things like social media have played a very big role in polarising things over time.

Q: What is at the root of all this? That there was too much of swing to one side earlier, now it's to the other side?

A: I think that old line "the past is better remembered than lived" is apt. I think this has always existed, but it's possibly that it's got amplified as you're saying and the pole position is shifting, with now the BJP at the centre of a lot of these debates the way the Congress used to be 30-40 years ago.

Q: You mentioned Bengal and UP, shall we take a short deep dive into this? Let's go with Bengal, because of your prediction in terms of vote share. What would that translate to in terms of seats for the BJP?

A: Very hard to call, because it crosses a certain threshold before it starts converting into seats and as I said it's such a mug's game in India to convert vote share into seats, that's why exit polls and opinion polls often sort of end up getting seats so wrong in terms of what reality is there. There's no way for me to independently assess that. What I do know is that the conventional wisdom of the Kolkata crowd is that it’s about 10-12 seats that the BJP will end up winning, which is still a sizable gain from last time but Mamata still has a sizable machinery out there, and if I also investigate this election, this is a bit of a health warning because it's true in both West Bengal and the rest, there is a bit of a fear factor is what we are told -- that in many parts of the Hindi heartland we're told that a lot of people don't speak against the BJP or the government for the fear of retribution. I don't know if that's true or not, we had pretty good conversations, but there's a general feeling of that. In West Bengal, it's the opposite, that there's a bit of a fear of Mamata, because she has hordes of cadres and all sorts of strongarm tactics, so they run a bit of fear of speaking too openly. So there's a bit of a feeling, but it's not substantiated, that in UP, maybe, in places like we went to, that the support to the Mahagathbandhan is being underestimated a bit and in places in West Bengal, the support to the BJP is being underestimated a bit. But the conventional wisdom is the best I can go by in terms of all the people in the know, so to speak, they think about 10-12 is what they'll get in Bengal and similarly in Odisha and that should help mitigate some of the losses that they will have in the Hindi heartland which they had maxed out last time.

Q: So what sort of losses do you envisage in UP?

A: See it's very difficult for me to come up with an exact number because as I said, you take these two vote banks that I just spoke about and their numbers are equal in terms of the arithmetic. The X factor there is Priyanka Gandhi, that she's come there and we just don't know as to by how many seats...more than seats, really, by what the vote-share of the Congress increases, because if it does, it will likely damage the Mahagathbandhan more than the BJP, that's what we got to hear when we were out there. But did we get much of mention of Congress when we went travelling on the road? Not really. So, that's become such an X factor, otherwise the easy prediction would be to make is that it's split down the middle, that's 35-35 each way, but this is the problem in calling this Indian election. One sort of tradition, which I've documented in the book as well, is that at the end of each trip, the entire group sits down and - it's a very competitive exercise - we try and do our forecasts because this is a favourite game for everyone to play. Generally, we've got the direction correct, even if the numbers have been off at times because it's so hard to call the numbers. So we did the forecast, all of us sat down, 20 of us, pretty serious-minded, like going on the trip to think about these things, some of them obsessively. The average forecast which came out of this was about 215 seats for the BJP. For the Congress, it was about 95. But here's what the problem with this is: If the BJP ends up getting 1-2% more in terms of votes, it could get 230 or more. If it gets 1-2% less in terms of what the vote share is, then the seats go below 200. Now the way the election looks will just be so different, that 215 is just about the mark where most people think the BJP will be able to come back to power, but if it crosses 230, it ends up looking like a significant Modi victory and he's beaten the odds of anti-incumbency which is so popular in India and that he's coming back. On the other hand, if it slips below 200, it's a major global story in terms of what's happened out here.

Q: You mentioned vote share. Surely the BJP would have near maxed out in terms of vote share at 30-31% last time, maybe 1-2 percentage points more or less this time. Where does this go from there?

A: I think this tells you about India, and this is also something I've spoken about in my book a lot, which is the fact that this is a very difficult country for nationalism to have too much appeal or at least nationalism as a theme has its limits because of the sub-national identity. The sub-national identity is so strong that for a national party to gain a vote share of much more than 30%, I think, is very difficult. So that's what I think is going to be the realisation after this election, too, which is that it's very difficult. Now remember, a couple of years ago it appeared for much of the first half of Modi's term that there were no limits to what the national party could reach in terms of the vote share, but I think this election will tell you that there is a natural limit to it because in the south of India it's very difficult for a Hindi-dominated party to do that well…so I think this is just the reality of India. Even in much of the Hindi heartland I get to hear that in places like Punjab, the narrative is very different. So the whole idea is that the sub-national identities are very strong in this country and that's what the Congress found eventually and the BJP will also realise, that it's very difficult for their appeal to spread, on the basis of just a national platform, too far in this country.

Q: So is one takeaway that you need to keep the sub-nationalists apart from each other? You don't want them coalescing. So if you were the BJP or the Congress, is that possible?

A: No, it's very difficult. What they need to do is co-opt that, which is basically that they have to encourage both strong state leaders and this sub-nationalism to be played out within their party ranks because the Congress killed that culture. That's why the Congress suffered so much from the 80-90s onwards because they killed the sub-national identities and didn't pay enough respect to that. That is the real lesson, that you have to do that, and that's a lesson for Mr. Modi, which is the fact that he's fighting the election completely on his own. To his credit, that has a lot of appeal along the Hindi heartland but as he knows very well, as you go to the south of India, possibly with the exception of Karnataka where he's still very popular, the other parts, he just doesn't resonate that much any more.

Q: So arguably, this is a much more centralised party than the Congress was during Indira Gandhi even, or even after that.

A: No, I think that it's possibly similar in terms of it because - it's hard to draw exact parallels with the past - but it's sort of similar that it's become very much centralised under Mr. Modi, compared to what the BJP also used to be 5-10 years ago.

Q: So that's one clear takeaway. Anything else? What do they need to do to grow? We were talking about 15 years of Modi when it started 5 years ago.

A: You know, it's about figuring out the second term, how do you break the curse of the second term. Because even with the UPA, and globally I've seen this pattern. Putting my investor hat on here on a bit, I've seen that whenever you look at, say, at one barometer -- the stock market. How does the stock market perform when a new leader comes to power and what happens over the years? We had a very interesting find. We studied a hundred elections in emerging markets over the last 30 years. What we found was the longer a leader stays in power, the less positive the returns are for the stock market, in the rest of the emerging world. There's an old Ralph Waldo Emerson saying: "At the end, every hero becomes a bore". In the end, people tire. How do you keep that message going? How do you do stuff which sort of makes you a very rare leader who lasts for a long period of time with a strong legacy? My own feeling is that the best he can do in a second term, especially if he's going to have to rely a bit more on a regional allies, is that he has to basically go back to what he used to say as the Gujarat chief minister. Back then, he'd speak a lot of decentralisation, about giving more power to the states rather than centralising because as the chief minister he'd view things differently. I think he needs to go back to that model if he truly wants India to develop because I think India's development will happen one state at a time rather than the very centralised model. Whenever India tries something centralised like demonetisation or even a GST which has been implemented at a central level, it will backfire. So it has to be done one state at a time and more decentralisation is what I think he needs to do to really leave behind a positive legacy, rather than go down the route where the longer you stay in office the more is the wear and tear.

Q: You mentioned your investor hat, can you just keep it on for a while longer? We have a couple of econ-related questions. A lot is being made about how disruptive demonetisation was for smaller industries, the sort you may have met on your trips to Kolkata and UP. What do you see on the ground? is it really that bad?

A: When I went for my previous election trip, which was in Madhya Pradesh and Rajasthan, in November-December of 2018, I saw much more of a negative effect there. I think the things are sort of stabilising now but I am concerned about the fact that the economy in general is looking a bit weak now. I'm not sure we can link it all to demonetisation or GST, but there is a liquidity crunch that people speak about. Look at the sales of passenger vehicles, commercial vehicles. There's something going on where the economy is just not seeming to grow at the pace everyone speaks about. Nobody thinks this economy is really growing at 7%. It doesn't feel that way. It doesn't pass the tests, there's a lot of controversy on that. But again I go back to that problem of the political economy, which is that the BJP supporters are not willing to accept that. For them, it's not an issue. It's okay. the anti-BJP supporters will only point to this. It is sad that there is no objectivity left. Even on the GDP data, it's completely along political lines. There's very little reflection going on based on what the data is.

Q: But surely Mr.Modi's core constituency - or what used to be - small traders, they would be feeling the pinch even if they wouldn't admit to it…

A: I think It's true, but they still feel that. When we asked the question, they admit to that, but they still say that "Who else is there?". I think the fact that the economy is slowing and the people are feeling the pain of a liquidity crunch, to me that is undeniable as a fact. I hear that from people when you have a pure economic conversation. The fact that we're in the midst of a major economic slowdown and people sense it, I think there's no question of that. Of course, some of it is because the global economy is very weak today. With the exception of the US, which is still doing okay, the rest of the world, with the economic data of the past 12-18 months, has consistently disappointed us.

Q: I don't know if you read Rathin Roy's observation of India's growth story being limited by consumption like in Brazil and South Africa?

A: We've a long way to go from here. In those countries, people forget that they've been stuck in the middle-income trap, we are far from there. Our per capita income is about $2,000. The middle-income trap which is spoken about is closer to $8,000-10,000. Let's first get to $3,000-4,000, then we can worry about those notions. Currently the issue is how do we even grow at 6-7%, what's the true rate that we're growing at? The advantage India has is the fact that our base is very low. From a low base, you're able to compound at a pretty decent pace; the second advantage we have is that we have a very good entrepreneur culture in the private sector. Let's not get all gloomy about this, I've looked across the emerging world and the maximum number of good companies we find to invest in, which consistently deliver earnings growth and a high return on equity happen to be in India, so let's give them some credit as well. But yeah, overall the macro environment is tough, the growth slowdown is there and any new government that comes to power will have to deal with that and also deal with this creeping problem of competitive populism where you have handouts being promised by both sides. Maybe the magnitude varies, but you have such handouts being promised and that is where we differ from China, because when China was growing at a very rapid pace, they were focusing on building roads, bridges and infrastructure to enable growth. We're doing more on the welfare side than China ever did. Coming back to my election trips like Uttar Pradesh, it struck me what our development priorities are. The biggest menace in Uttar Pradesh we found was stray cattle, and the economic effect of that is still not understood or at least has been underappreciated. But now the government, to deal with that problem, is being forced to build more and more cowsheds. Should that really be a development priority -- building more and more cowsheds because you've killed the cattle trade? Or should we be spending that money in terms of improving, doing more to improve your basic infrastructure? It just tells you about where our development priorities are, and then it's no mystery that if you're spending that much money on those objectives, you're never going to grow like China. In China, development, basically was ruthless capitalism. People could get whatever land they wanted, there were hardly any labour protection laws and it ended up growing at a rapid rate. Now they talk much more about instituting a welfare state. India's sort of going the other way. So that is a concern.

Q: Let's just bring the two together, the results and the economy. Let's take three scenarios: BJP wins, Congress-led combine wins and the Federal front wins. How do you think the economy's going to respond to these three results?

A: I think the initial response if BJP doesn't come back to power will be a negative major response [from the markets]. My feeling is that there's no real relationship with the nature of the government that you have and the economic outcomes and that is what history has shown us. In the period of 1996-98, a lot of people still refer to the budget in 1997 as the dream budget. It was in the midst of a coalition government that was as rag-tag as a coalition we got. In 2009 when Manmohan Singh got re-elected, the stock market was so euphoric, it was limit up for a couple of days thinking that a stable government's come, the Left will be edged out and how good this is going to be. The next five years, most people will agree, was an economic disaster as far as India was concerned. So I think there's no real connect between economics and politics. Another statistic I refer to in my book is that we did a study to look if a state's economy grows at more than 8%, what is the political outcome and we found that in a chief minister's term if that happened for 5 years - 5 years, 8% growth is a very significant achievement - half the time the state chief minister lost the election. So that's just what India is. There are so many factors, including in Karnataka. No chief minister seems to come back even if the state has a very strong growth run. Karnataka is among those 27 states that we found where a state grew 8% a year on average in the CM's 5-year-term and the still the CM didn't get elected.

Q: Fascinating. Any other gems you can throw us from the book?

A: The book's a travelogue. It's a way of how India feels, smells, tastes. Like you go to a hotel in Kanpur, let's say the Landmark Hotel, the only place which had a proper swimming pool 10-15 years ago and yet to see the conservative values where a woman would still bathe there fully dressed. Or how the mindset in small-town India is, try to get that out in terms of all these places. And of course it's peppered with the usual statistics, like one thing which I find fascinating again is the fact that if you look at the top business families or top companies in India, 2/3rd are family-owned. We crib about dynasty in Indian politics, it's very prevalent in business. And so the conclusion I have is that politics is often the downstream of culture: If you look at the billionaires in India, there's over a 100 in India now, two-thirds of them belong to just one caste, the trading communities, which form just 1% of the Indian population. I think it's these observations which hit you when you go out on the road and then there's the fascinating journey of this country, the hospitality. I was thinking about which other country I can go to in these cars, barge into peoples' villages and homes, and the hospitality that’s extended. Food comes out, you're allowed to use the toilets, water's served and there's never a sense in India when you travel, of insecurity unlike Brazil or South Africa, where I hesitate to go outside the hotel room for a walk.

It's that journey of India which makes you fall in love with the country all over again, which is what we've undertaken for the last 20-25 years and that's what I've tried to capture in this book about what really India -small-town India in particular - feels, smells, and talks like.

Hope to have you back for the next election, whenever that is. Thanks a lot for being with us, it's been fascinating. Thank you.