The global investor on the forthcoming general election, the anti-incumbency trend and why he thinks the Indian state is socialist.

In his latest book, ‘Democracy on the Road: A 25 Year Journey Through India’, investor Ruchir Sharma has catalogued the 27 national and State elections that he has covered over a quarter of a century in his personal capacity. Mr. Sharma, who is the head of emerging markets and chief global strategist at Morgan Stanley Investment Management, discusses the 2019 general election, explains why India has the highest anti-incumbency rate among major democracies and why it can never be a China on economic reforms. Excerpts:

There is a thread running through your book about India’s “deep distaste for incumbents”. Do you mean Indians instinctively throw out governments, whatever their record?

The word anti-incumbency was coined in India. When I write for The New York Times or such publications, and I use the phrase, they don’t know what I’m talking about because the phrase was coined here. That’s because India has the highest rate of anti-incumbency among major democracies in the world. In the U.S. and the U.K., most incumbents tend to get re-elected. In the U.S., for example, two-thirds of Presidents and Governors who stand get re-elected; in India, two-thirds lose their elections. That’s what the data say.

There are two or three reasons why this happens. The foremost is that the state in India is broken. Politicians want to do stuff and promise stuff, but the state is just broken and cannot deliver. It just falls through the cracks. For example, yesterday, I was in Bijnor [Uttar Pradesh], and before the District Magistrate’s office, a big protest broke out by sugar cane farmers over the question of dues. The whole issue is that you can keep announcing things, like minimum support price, but the moment you take your payment slip to the Food Corporation of India, they give you the runaround. The mechanism is so broken that your daily interaction with the government is very frustrating and possibly the only thing you can do is vote people out. Secondly, it doesn’t take much to vote people out because of the fragmented polity. In most States in India, you can win most seats by securing 30% of the vote share, so then just a 3-4% vote swing is enough to change the fortunes of a government, or if the Opposition comes together, it can change things. These are factors that distinguish India from other countries.

There have been many instances of governments being voted back. How do you explain that?

Again, there are a couple of things. There was a period of time, between 2005 and 2010, when a lot of incumbents won elections in India. A couple of things happened in that period. One, the economy was booming and inflation was fairly low, and two, because the economy was booming there was a lot of welfare that could be done, as governments were able to spend on these programmes. This really helped those governments come back to power.

Having said that, one of the more insightful statements which I have repeated twice in the book is by a Mangaluru MLA, U.T. Khader, who said that winning elections in India is like fighting a battery of six tests with a minimum passing mark on each. You can’t rely on just one factor — if you don’t do enough welfarism, you will lose; you have to get the caste arithmetic and religious politics right; or some huge allegation of corruption hits you. In American politics, there is a far more obvious connection between economics and politics. That argument appears simplistic in the Indian context.

You say that India’s national elections are a series of State elections. Can you explain?

That’s what happened in 2004, in 2009, and, in fact, in most non-wave elections, unlike the 1984-85 Rajiv Gandhi wave and the mini wave, mainly in north India, for Narendra Modi in 2014. In Delhi and Mumbai, we are preoccupied by questions like, “If Modi doesn’t return in 2019, then who comes in his place?” But it doesn’t work that way in the rest of India. We are a truly parliamentary system. One bit of data that I keep quoting is that in 2004, the gap between Atal Bihari Vajpayee’s popularity and that of Sonia Gandhi’s was much larger than the current one between Modi and Rahul Gandhi, and yet because she was able to stitch good alliances, the Congress was able to win. Even this election, it’s going to go State by State.

Coming to political personalities, you say that Bahujan Samaj Party chief Mayawati hasn’t been able to accrue much influence outside Uttar Pradesh or grow beyond it.

It’s amazing to me how no regional leader has been able to grow nationally, and with Mayawati, you would have thought with a large Dalit population across the country, she would have become a pan-Indian presence. But the fact remains that Dalits are not a monolithic bloc of votes. The one State where I remember people telling me that Mayawati could have a big influence was Maharashtra, and yet she is a complete non-entity there. Being a prime ministerial candidate is a different matter and more a negotiation based on how many seats she gets, but her case proves to me that India is truly a ‘continent’ of 29 States and it is almost impossible for a leader who is strong in one State to replicate it everywhere else.

A part of your interest in politics was also to see whether there would be a leader who could push economic reforms. In the book, you come to the conclusion that the Indian DNA is statist and socialist.

In this country, there is no constituency for privatisation today. Is there any scenario in which you think that any big push for privatisation will be launched after the 2019 polls? I don’t think so. There was some chance in 2002, there was some chance with Modi in 2014. To me that is the evidence — that what I said about statism stands. The good thing in India is that the private sector is so vibrant because of some liberalisation in the past that it can carry the can, but that is also why India can never grow like China. In the early years of its development, China had no welfare state; it spent entirely on roads and infrastructure. The Indian polity will not allow that.

Through your many years of covering polls, you have met several political leaders — right from the time they were introduced to politics to when they were more mature in politics. What are the changes in Rahul Gandhi from when you met him in 2007 to now?

In 2007, it was a two-hour-long meeting in which he spoke for an hour and 59 minutes. He didn’t want to engage much despite the fact that he had just entered politics and it was a roomful of fairly experienced political watchers. The unfavourable impression was of being spoken down to. Over the years we found that he was much more interested in engaging and listening. We don’t know how much of that is change and how much is based on feedback. There is, of course, no doubt that he has improved a lot as a campaigner from 2007.

What about Priyanka Gandhi Vadra and her formal entry into the Congress? Will she able to make a critical difference to the Congress’s fortunes?

I think the days are gone when you could just land and your charisma would work. That India is not there anymore. You also know how deeply entrenched caste equations in Uttar Pradesh are. To disturb them at this stage will be a very difficult thing to do. If I were to be asked on how she can make the biggest difference, it would be to get her to focus on one thing. Let’s say she manages to be the combined Opposition candidate from Varanasi against Modi. Then you can focus that energy on one thing, but the idea of building the Congress so that it’s a serious contender by April 2019 based on just charisma... that concept no longer exists. The deliverables from Priyanka should be adjusted in that way if she is to make an impact.

You have described several tense meetings of your travel group with Prime Minister Modi and BJP president Amit Shah. Why is that?

They have a belief that the entire media is ‘liberal’ and out to get them. It’s a different situation from, say, 15 years ago, when the word liberal was not used so pejoratively. They really believe that the media is out to get them and it colours that interaction.

But a lot of it also informs a narrative of Modi versus all, and if not Mr. Modi, then anarchy. How well do you think that will work in 2019?

Rajiv Gandhi tried something similar in 1989 and that didn’t work so well. It may work with some sections of the people, especially the middle class, but at the broader level people vote for the party they want to and not see what’s going to happen after the election.

In your view, what will be the overarching issue informing the 2019 election? Will it be jobs, rural distress, Ram Mandir, or Mr. Modi’s own version of Hindutva?

This election is going to be all about alliances. Narendra Modi’s support base is still strong, there could be a little in and out on that, and he could still get 31% of the vote share, but the seats this time could be way less than the 9 to 1 ratio, which was the highest vote-to-seat conversion ratio in the entire electoral history of India.

In how many States the Opposition will be able to put up good alliances will determine the course of this election.