Sadanand Dhume, a resident fellow at the Washington-based conservative think-tank American Enterprise Institute (AEI), has co-authored a working paper on the Indo-US relationship – ‘Falling Short: How Bad Economic Choices Threaten the US-India Relationship and India’s Rise’. As the title explains, his argument is that India made some bad choices in the last couple of years, affecting its economic growth on the one hand and its ties with the US on the other.

During a recent visit to New Delhi, Dhume spoke with Trithesh Nandan about India-US ties, Indian economy, and western perceptions of BJP’s prime ministerial candidate Narendra Modi.

Excerpts:

You mention in your latest paper that the Indo-US relationship stands at the crossroads. Against that backdrop, how do you see the recent meeting between Manmohan Singh and Barack Obama?

The best way to characterise Manmohan Singh’s US visit is that expectations were low but those low expectations were met. People were not disappointed because they were not expecting much from this visit. There wasn’t any dramatic policy announcement.

However, there was some kind of progress, especially on the nuclear issue, which had been quite a stumbling block. There was a strong sentiment in the US that nothing had come out of the nuclear deal with India. Now they have made some symbolic gestures. How substantive they are remains to be seen.

Is it that Brand India and Brand Manmohan do not cheer American policymakers and businessmen any more?

That is a fact. When you begin to lose your turf, your clout starts diminishing. No one has made drastic reassessment in the last one year. It is like a giant ocean tanker going in one direction. Now it seems to have stopped. Something is wrong but nobody is saying yet that it has reversed. But it has come to a slowdown. Questions are being asked.

If the same questions continue to be asked a year from now, then we have a real problem.

India’s growth story and its relationship with the US have gone in the wrong lane though we have an economist PM who has invested more in improving these ties than any other PM.

It doesn’t matter if your PM is PhD in economics; what [matters is his] bosses’ view on economics. Manmohan Singh in his entire career is the guy who basically implements what his bosses say. That’s not a bad thing but he does that. In the 1980s, he was not the reformer; that was his ruling political dispensation. When Narasimha Rao wanted a different type of economy, again he implemented it. Sonia Gandhi wants to go back to the little bit of old style, so he implements it. So the idea that economic policy would be sound because this person has an understanding of economics is completely flawed.

The lesson for the world and for India is don’t pay attention to the guy who goes to the boardrooms in New York and Davos but pay attention to what politicians say to people. And if the politician is telling people in Hindi  that I am going to give a freebie, that is what the policy is. We should listen to the guy who is speaking in his own language to his people, who are his own voters. That is the moral of Singh’s dispensation.

Do you think the business community has switched to the wait-and-watch mode till general elections?

Till three years ago, American businessmen were cheerleaders unambiguously supporting India. Indian economy was the toast of global investors. But they are not so enthused now. There is a strong erosion in confidence. Yes, the businessmen are waiting. They want to be sure if the business climate has improved and there is some sense of policy certainty. This is a usual thing for investors in the developing world. Now India is already in the election mode. No one is expecting any dramatic reforms. People are waiting and watching what happens.

Talking of problems coming from the US, India’s IT firms have criticised American policies, especially the immigration reforms bill. Will their voice reach the policymakers?

They haven’t had a voice. People [policymakers] have not been listening to them for a reason. The Indian government itself has put in place so many really bad policies like retroactive taxes. Then, people have issues on intellectual property rights, preferential market access. Multinational companies have completely different experiences in other countries like Singapore. India should have fair tax assessment. There is extreme pressure from tax authorities in India which makes it difficult for the companies to do business here. And, all of that has filtered back to the US Congress. So when you ask people [US policymakers] now to do something for India, they won’t (because) there has been so much of bad news and bad decisions from India on the economic front.

Is the Indian diaspora in the US throwing its weight behind India?

The 3 million-strong Indian community is one of the richest [in the US] but their role is quite disappointing. The nuclear deal was an exception when the diaspora really came together, showed great unity of purpose and had an ability to work with others to shift the debate in a certain direction. Now it doesn’t have the ability to do so.

What is the perception among policymakers, Congressmen and think-tanks about ties with India?

There is a spectrum of opinion. There is no uniformity in a way that everybody in the think-tank thinks in the same way, or everybody in the administration or in Congress. There is a diversity of views in each of the three. I would say each of them remains broadly pro-India, favouring a strong India that is good for Asia and the world, wanting India to prosper and wanting Indian economy to grow so that it eradicates poverty, and to build on the successes of last 22 years: all of that is there. But at the same time, there is a little bit of fatigue. That’s an issue.

How does America see Narendra Modi?

Modi is a very polarising figure everywhere. I am neutral but I have friends, whom I respect, like, and admire, who think Modi is the best politician in India. There are other people, whom I respect, who worry about him. The view in the West is also that he is a polarising figure though in the Indian diaspora, he is a very popular figure. I don’t have data to substantiate it. I am talking on the basis of anecdotal experiences. There is a groundswell for him.

In India, our conversation about Narendra Modi in 2013 is very different from our conversation about him in 2003. Now you have a very different conversation about the Gujarat chief minister. It seems that he is a different person. The new conversation is about business, governance, decision-making and decisiveness. The old conversation is more about riots, communal conflicts and minority rights. In the West, the conversation has not moved much – there are many people who still carry the old conversation. Yes, for sure, some may have moved to the new conversation.

I would say that today 80 percent of India has the new conversation and maybe 20 percent the old conversation. I would say in America it is much more like 50-50.

(The interview appeared in November 1-15 issue of Governance Now magazine)