Why the fuss over the ‘Hindu rate of growth’ 

What is the Hindu rate of growth? 

This is a rather disparaging term used by Professor Raj Krishna, an Indian economist in 1978 to describe the slow growth in India. The average annual GDP growth in India between 1960 and 1980 was just 3.55 per cent, according to World Bank data. 

Raj Krishna was trying to link the Hindu philosophy of being minimalistic, non-competitive and content, with the growth rate. While other advanced nations were trying to boost growth through capitalist policies, India’s policies in the pre-1980 era had a socialist slant which put public welfare above growth.   

Why is this phrase in the news? 

There is a sudden interest in this phrase because former RBI Governor, Raghuram Rajan, said in a recent interview that India is dangerously close to the Hindu rate of growth, based on the third quarter GDP growth. He was referring to the sequential slowdown in quarterly GDP growth. 

While the growth in the December quarter of 2022 was 4.4 per cent, there was a marked deceleration from a growth of 6.3 per cent in the September quarter and 13.5 per cent in the March quarter. 

Many economists have criticised Rajan’s remarks. State Bank of India’s chief economist, Soumya Kanti Ghosh, wrote, “we find such argument ill-conceived, biased and premature at its best when weighing the recent GDP numbers against the available data on savings and investments.” 

Why are other economists critical of Rajan’s statement? 

Economists are saying that quarterly GDP growth numbers tend to be volatile and cannot be used to label growth. The third quarter of 2022-23 recorded lower growth due to upward revision in the numbers for the corresponding quarter in the previous year. Also, Rajan was commenting on quarterly GDP growth numbers while using this phrase, whereas this growth rate referred to annual growth. 

Is Rajan right to be using this phrase in the current context? 

Rajan is right to be worried about prospective growth slowdown given RBI’s aggressive rate hikes, slowing consumption demand, manufacturing hitting a speed-bump and challenging external environment impacting exports. While the RBI has projected the growth for 2023-24 at 6.4 per cent, the number does appear a trifle optimistic. There is a possibility of the growth in the first and second quarters of 2023-24 being lower than the RBI’s estimation of 7.8 per cent and 6.2 per cent, respectively. But that said, it is dire to be predicting that growth will slip below 4 per cent in the coming quarters. 

Also, given that the growth rate in India is among the highest among the G20 countries and that many other countries in this cohort are on the verge of a recessions or debt crisis, being overtly critical of the growth rate was not warranted.   

Is the phrase ‘Hindu rate of growth’ outdated? 

As explained in the first answer, this phrase represents a certain philosophy — of existing in a blissful non-competitive state, in perfect harmony with other countries — which does not reflect the conditions existing now. The country is making rapid progress in all fields and willing to compete with the best in almost all spheres. In a world where each country is taking care of its own, India too has learnt to do the same. 

This kind of condescending labelling is therefore widely off the mark. 

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