Salman Anees Soz: Winning is not vindication

“As a member of the Congress party, I was depressed that we had lost so badly. At the same time, I felt that perhaps the country needed a fresh direction...” This is how Congress spokesperson Salman Anees Soz describes his feelings about the 2014 general election results in his recently released book The Great Disappointment: How Narendra Modi Squandered a Unique Opportunity to Transform the Indian Economy .

The timing of the book couldn’t have been better, or worse, depending on which side you are looking from. For those backing Prime Minister Narendra Modi’s Bharatiya Janata Party, it can serve as a sobering reminder in the middle of their jubilation over a sweeping re-election; and for those with the Congress party, it’s more of the same angst.

In a conversation with BL ink , Soz — an international development expert earlier with the World Bank and an economic and political commentator — candidly acknowledges where his party erred in the just-concluded elections. However, he insists that his book’s premise remains relevant and warns that if the Modi 2.0 government repeats its mistakes, it will leave the country at “a great economic disadvantage”.

Edited excerpts:

Your book concludes where the new government starts. And the election results clearly show that economic issues have not really impacted the vote bank.

The Modi government is now in with a bigger majority than it had earlier. Let us be clear that does not mean, by any stretch of imagination, that it is a vindication of the economic management in their first term. When I was looking at Modi’s tenure from 2014, I was focused more on economic prospects and performance, and nobody who knows about economic development and reforms can argue that the book’s premise is wrong.

The book’s premise is that Prime Minister Modi had a historic verdict in 2014 and he had talked about transformative policies under his leadership. At least on the economic front those hopes did not fructify. He squandered an opportunity.

The Great Disappointment: How Narendra Modi Squandered a Unique Opportunity to Transform the Indian Economy; Salman Anees Soz; Penguin; Non-fiction; ₹599

It is not only about the banking sector or demonetisation or GST rollout or agriculture sector or lack of investments. I think what people will realise later is that by neglecting areas such as health and education, India’s long-term future has received a setback. I am hopeful that in this second term, with an even bigger mandate, they will actually focus on things that can prepare India’s youngsters for the future.

The future is going to be very complicated and driven by technology and skills.

Normally, you would think that in a country that has a poorly performing economy the incumbent government will be in trouble. But in this case they did better than last time, and there are reasons for that. It has nothing to do with regular conventional economics because here the Modi government has underperformed.

So if not economics, what led to the win?

My view is that multiple factors including the rise of nationalism (Hindutva) and economic populism (providing ₹2,000 to farmers before the elections, LPG cylinders) created hope. Also the importance of money in this election cannot be dismissed — reports of massive spending by the BJP are now out. There are studies that show a lot of money has been floating around. Besides, the BJP had captured sections of the media and the projection of PM Modi as the only leader in India by the media has had an impact.

Adding to these factors was institutional weakness. If you can control institutions to promote your views and ideologies, it obviously will have an impact. Of course, the BJP’s organisation at the ground was politically savvy, and they stuck to their message. We may call BJP’s message divisive or polarising, but they stuck to it. In some ways, we have to give credit to them for their political strategy.

On the other hand, there are weaknesses in the Opposition. For my own party there are organisational weaknesses which our president [Rahul Gandhi] has also acknowledged.

There were deficiencies in the Opposition in terms of narrative, in terms of strategy, in terms of organisation, that contributed to this. So, on the one hand there are things that the BJP and the government did and, on the other, there are things that the Opposition did not do.

In the book you say the Modi government kept some of the promises made during the 2014 elections and failed to keep others. So you agree there was an intent to do it?

If you chart the course of the Modi government’s first term, the focus was on how we can become more efficient, how we can do things better. But the reforms that were needed were kept on the back-burner.

The idea was that when he [Modi] was the chief minister of Gujarat he was able to run the government more effectively, efficiently, because he was personally involved, [and a] similar system should be adopted at the national level. As a result they decided to focus on the ease of doing business and all that, but they did not address the fundamental problems in the economy.

I think what happened was that the economy PM Modi inherited from Dr Manmohan Singh was a recovering economy (there are plenty of independent analysts who say so), and what the PM and (former finance minister) Arun Jaitley probably felt was that we will grow out of the problems... and “we can make efficiency improvements”.

That is why you see a lot of centralisation — a powerful PMO. The PM thought that he could make those improvements. The problem was that fundamental issues like the one in the banking sector were serious issues, and you cannot wish them away. The lack of attention has now made it a bigger problem. Now we are looking at a broader financial sector problem — it is not only about the banking sector any longer.

They had the advantage of low oil prices?

When they had the oil windfall, it was not utilised properly. On the one hand you had falling crude prices and commodities prices; on the other hand you had monsoon failure for the first two years. You had to support farmers, as they make up a major chunk of India’s workforce. But instead of helping out, the government took contradictory policy measures — Minimum Support Price (for farm output) growth was slowed down, NREGA (rural job guarantee programme) implementation was slowed down, and this kind of shocked the economy.

The economy was slowing down about five quarters before demonetisation (November 2016) because there were problems in the rural economy. And government policies hurt the agriculture sector. Besides, the government did not pass on the benefits of lower crude oil prices to the consumers.

If you believe that the government spends money better than the average household, then it is okay. But I personally don’t think the government spends money wisely, especially in countries such as India where implementation capacity is limited. I think governments tend to be more wasteful, not because they want to, but because our systems are such that it is difficult to be efficient and effective.

So if I had been a policymaker at that time, I would have suggested passing on some benefits of falling crude oil prices to consumers. Don’t give everything, keep some for government. That would help in countering economic slowdown, which we were facing at that time.

Of course you want ease of doing business — but their focus ended up giving advantage to big companies and neglected small and medium enterprises. A level playing field should have been created. If you want to reform you have to think of broad-based reforms.

The BJP mantra was ‘maximum governance, minimum government’, but if we have a centralised set-up where the Prime Minister’s Office was taking all calls, was it right to blame Arun Jaitley for the slowdown?

The promise was ‘maximum governance, minimum government’, which sounds very nice. But we did not see this in the first term of the government because I don’t think the PM as a person believes in it. I think he is a big public-sector man and a centraliser. I think he believes that he is the only one who can get things done. And that is why the PMO became so powerful and involved in everything. Obviously Mr Jaitley being a senior minister had some degree of freedom.

But I don’t think that centralising power in a country so big and diverse works, or is good for the economy.

You can argue, “did he not win, did he not have schemes like PM Kisan Yojana...?” Yes, he did. But the question is, by giving farmers ₹2,000 before the elections or ₹6,000 in a year, will this lead to the kind of growth India needs, I am not too sure. You need to create decent, well-paying jobs, and for that you need to create a bustling economy and a skilled and educated and healthy workforce.

In the book you warn about the challenges the government will face…

Yes, the government will need to focus on education and health in a completely fresh way. We need to invest in them. Related to this is the unemployment challenge — which is both short-term and long-term.

Appalling neglect: The country’s impaired healthcare delivery system calls for a complete revamp

What can happen to spur economic activity, given the circumstances we are in? The government should not be getting in the way of private sector activity. Regulate but do not choke economic activity. Also, institutions like RBI (Reserve Bank of India), CSO (Central Statistics Office) and NSSO (National Sample Survey Organisation) need to be strengthened, not subverted.

And no government should forget to address the issue of climate change. It is a huge problem and may end up becoming larger if we don’t pay attention. Many parts of the country are water-stressed. We need to pay attention to this.

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