India close to ‘Hindu rate of growth’ states ex RBI Chief

Subject : Economy

Section: National income

Concept :

Former RBI governor Raghuram Rajan has said that India is “dangerously close” to the Hindu rate of growth in view of subdued private sector investment, high interest rates and slowing global growth.
Rajan referred to sequential slowdown in quarterly growth seen in the latest estimate of national income released by the National Statistical Office (NSO) last month.
GDP in the third quarter (October-December) of the current fiscal slowed to 4.4% from 6.3% in the second quarter (July-September) and 13.2% in the first quarter (April-June).

Hindu rate of growth

The term ‘Hindu rate of growth’ was coined by Professor Rajkrishna, an Indian economist, in 1978 to characterize the slow growth and to explain it against the backdrop of socialistic economic policies.
It is used to represent the nature of the growth of the Indian economy at around 3.5 per cent per year.
The term came into being to show India’s contentment with the low growth rate, post independence.
While the other countries clamored for more growth, Indian fatalism was cited as a possible reason why policy makers were not seeking ways to boost the economy.
The word “Hindu” in the term was used by some early economists to imply that the Hindu outlook of fatalism and contentedness was responsible for the slow growth.
However many later economists pointed out that the so-called Hindu rate of growth was a result of socialist policies implemented by the then staunch secular governments and had nothing to do with Hinduism.

When do we say that a country is having Hindu rate of growth?

Small growth rate alone does not characterize Hindu rate of growth. Prolonged low growth rate, albeit not an economic contraction, is not sufficient to be deemed as the Hindu rate of growth.
In addition to growth being low and extending over a long period of time, the term also captures a low per-capita GDP, by factoring in the population growth.