Dheeraj Sinha is the author of two books on Indian consumer market. His latest release is India Reloaded – Inside the Resurgent Indian Consumer Market published by Westland in India and Palgrave, internationally. His previous book, ‘Consumer India – Inside the Indian Mind and Wallet’, published globally by John Wiley & Sons, is a recommended read at Wharton Business School’s course on emerging markets.
Dheeraj leads the strategic planning function for Grey (WPP Group) in India, South & South East Asia. Previously, he led planning for Bates (WPP Group) in Asia, across thirteen countries. He has worked in advertising for over 16 years across McCann Erickson, Euro RSCG, Bates and now Grey. Below you can read an excerpt from his latest book, India Reloaded – Inside the Resurgent Indian Consumer Market. Coirtesy: Dheeraj Sinha. Read his interview here.
Powered by People, not Policy—What Makes India’s Growth Story Sustainable?
Democracy versus Economics
Unlike that of China, say, India’s growth story is driven by people, not policy. What makes the Indian growth story sustainable is the personal enterprise of millions of Indians and their desire to move up the ladder of life. The role of state policy thus far has been limited, except for the act of economic liberalisation in 1991. There is a reason why state policy in India is not designed to favour the market forces: the India that benefits directly from the market forces and the India that votes the government into power are traditionally two disparate sets of people.
There is a fundamental gap between India’s democracy and its economy. The India that votes politicians to power is not the same India that powers its economy. The former is traditionally influenced by caste and religion, while the latter is powered by individual enterprise. The India that powers the economy is comprised largely of the white-collar middle class, who are not only fewer in number, but traditionally reluctant to even turn up for voting. They are saddled with a feeling of helplessness and apathy—that their few votes will not change the nature of India’s politics. For the hardworking, educated middle class, it is indeed a dilemma, as the list of corrupt, incapable candidates leaves very little to choose from.
The other India, which turns up in large numbers, comprises the rural population and urban unskilled working class; many of them are either illiterate or have had very little education. Their direct dependence on the economy is low or not self evident, but small favours by their local leaders in terms of money, getting a job, moving a file within the government, or even protection against the local goons, makes a significant difference to their lives. The odds that these favours will come to them are higher if the politician belongs to their caste or religion. That’s why the voting preference of this India is coloured by caste and religion, rather than the economic philosophy of the political candidate.
Time and again, the Indian electorate has shown little regard for growth and development agenda while voting. In the 2004 general elections, the BJP, the ruling party, went to the people on the platform of ‘India Shining’, showcasing a developing and prospering India. The BJP lost the 2004 general elections to Congress, which had made the common man (aam aadmi) its mascot, thus repositioning the BJP’s development-speak as elitist. In the same year, Chandrababu Naidu, who led the BJP–TDP alliance in Andhra Pradesh, lost the state elections to the Congress. Chandrababu Naidu was the poster child of Indian IT, the laptop-carrying Chief Minister who embraced e-governance and worked hard to attract foreign investment to his state, Andhra Pradesh. While it is simplistic to attribute the BJP’s losses in both these cases to its election platform of economic development, it did send a message to Indian politics that economics doesn’t help win elections in the Indian democracy.
Having won on the platform of aam aadmi (the common man), the previous Congress government went ballistic on socialist initiatives. Measures such as NREGA (The Mahatma Gandhi National Rural Employment Guarantee Act), saw unprecedented budgetary allocations. NREGA aims to secure the livelihood of people in rural areas by guaranteeing 100 days of wage-employment in a financial year. It’s a scheme for rural households, whose adult members volunteer to do unskilled manual work. Initiatives such as NREGA suffer from huge leaks in the system, which prevent its benefits from fully reaching its intended recipients. Added to this is the argument that by employing labour in construction-related jobs, NREGA is working against the interests of agriculture. In its pursuit of socialist policies, the government levied an education surcharge on income tax and continued its patronage of subsidies on fuel, fertilizers, cooking gas, and food grains. The jury is still out on how these policies have improved the lives of the common man, but we know for sure that these policies helped balloon the government’s fiscal deficit. All this while the policies that could set the market forces free hung in abeyance.
The trickledown effect of today’s policy decisions may lead to positive outcomes over a period of time, but in the short term, what’s pro-economy may not appear to be pro-people. For instance, the case of allowing FDI (foreign direct investment) in retail has been under debate on the grounds of a loss in employment and damage to small-scale retailers. The Congress government did many flip-flops over its decision to allow FDI in retail, finally setting for a halfway solution—51% in multi brand and 100% in single brand. Under the erstwhile Congress government, several such pro-economy decisions were held up on the grounds that they would hurt the common man and his immediate interests.
Democracy and Economics
“I want to see you, laptop in one hand, Quran in the other,” is what Narendra Modi, India’s current prime minister said during his electioneering in 2014, while reaching out to the minority community. Narendra Modi fought the 2014 elections on the platform of development. It allowed him to leverage his developmental credentials from Gujarat, as its chief minister for many years. More importantly, it helped him bypass the allegations of Hindu fundamentalism. Development as a platform leveraged the strengths of Narendra Modi, while taking the focus away from his weaknesses. The 2014 verdict suggests that it resonated with the larger India, returning the BJP to power with 282 seats. This would be the first time in India that people have voted for development over the considerations of religion, caste, or region.
Or, so we would like to believe. Indeed, the 2014 win for the BJP is a combination of multiple factors. The BJP’s 2014 election strategy appears to have drawn straight from Chanakya’s strategy of saam, daam, dand, bhed. Chanakya was an Indian teacher, philosopher, and royal advisor. He served as the chief advisor to Chandragupta, the emperor of the ancient Maurya Empire, and is credited for Chandragupta’s rise to power in 322 BC. His strategy espouses the use of multiple influences, ranging from reason (saam) and lure (daam) to punishment (dand) and divisiveness (bhed), in order to win a battle or a political situation. Similarly, the BJP’s 2014 national elections campaign was fought on multiple platforms—development, decisive leadership, religious undertones, and caste affinity. It might therefore be an overstatement to say that this was a victory for development alone.
The 2014 verdict was as much about giving Narendra Modi a majority (read: free hand), as punishing the Congress. The Congress being confined to 44 seats is like it being asked to hold its hands over its ears and stand outside the class. The vote for Narendra Modi was a vote for clean governance and decisive leadership. It was a vote against the free reign of scams and a protracted silence on the key issues that the previous government became notorious for. True, that change was at the top of the BJP’s 2014 election agenda. However, a large part of its victory, especially in states such as Uttar Pradesh, came from playing the caste equation right. For instance, in Uttar Pradesh and other caste-sensitive constituencies, Narendra Modi’s backward caste credentials were fully leveraged. Although Hindutva wasn’t played as an overt card, the RSS (Rashtriya Swayam-Sevak Sangh) cadre leveraged all its muscle on the ground to garner the requisite support for the BJP.
The campaign also translated development into what it means for people, rather than leave it as a macro, GDP-level conversation. Development was translated as jobs, roads, and electricity, which people care for, rather than GDP, inflation, and fiscal deficit, which only the intellectual class understands. Narendra Modi’s humble beginnings as a tea-seller helped make the development conversation relatable. He personified the story of personal progress and the progress of Gujarat. The BJP’s ascension to power in 2014 was the result of multiple narratives that the organisation successfully managed to put out to the public. It just happens that one of the dominant narratives was development.
The divide between economics and democracy may be narrowing, but it’s unlikely to go away so quickly. One of the first major initiatives by the new BJP government is the Pradhan Mantri Jan Dhan Yojana, a financial inclusion scheme that provides bank accounts to 75 million poor families, an overdraft of ₹ 5,000 ($82) after six months of account operation, accident insurance cover of ₹ 1 lakh ($1633) and life cover of ₹30,000 ($490). Launched by the Prime Minister, Narendra Modi in his Independence Day speech, the scheme successfully opened 15 million bank accounts on its first day. The scheme comes with freebies of insurance, which in most likelihood will be underwritten by government-run institutions such as the National Payments Corporation of India (NPCI) and the Life Insurance Corporation (LIC). These write-offs are in effect disguised subsidies, which will add to the fiscal deficit. So it turns out that the first major initiative of the new government is laden with subsidies. It looks like there’s no running away from populism in a democracy.
The ink hadn’t dried on the headlines declaring the victory of development as a poll-winning agenda, than the by-elections for the Bihar State Assembly proved them wrong. Held barely three months after the national elections, the Bihar by-elections, gave power back to caste-based politics. The grand alliance between Lalu Prasad Yadav of Rashtriya Janata Dal (RJD) and Nitish Kumar of Janata Dal United (JD [U]), won six of the ten seats. Bihar, which was once on track to recover its lost ground on economic development, seems to be back to caste politics. Nitish Kumar, who was leading a remarkable turnaround of the state through pro-economy policies, has had to go back to caste calculations to keep his party in power. In tying up with the RJD, whose three-term rule in Bihar led to lawlessness and deterioration, Nitish has chosen vote-bank politics over developmental economics.
The decisive verdict of the 2014 national elections may be an early indicator of a change in the thinking of India’s electorate. But the shift from caste and communal considerations to development as an agenda isn’t complete. As the dreams and desires of the larger India—the India that votes—get provoked further, the better the chances that their vote will be pro-economy. Until then, India banks on its people, not government policies, to power the Indian growth story.