Former Reserve Bank Governor Raghuram Rajan, in a recent email interview to news agency PTI, had said India is "dangerously close" to the Hindu rate of growth owing to the subdued private sector investment, high interest rates, and the global economic slowdown.
He said the sequential slowdown in the quarterly growth, as revealed by the latest estimate of national income released by the National Statistical Office (NSO) last month, was worrying.
The Gross Domestic Product (GDP) in the third quarter (October-December) of the current fiscal slowed to 4.4 per cent from 6.3 per cent in the second quarter (July-September) and 13.2 per cent in the first quarter (April-June).
The growth in the third quarter of the previous financial year was 5.2 per cent.
"Of course, the optimists will point to the upward revisions in past GDP numbers, but I am worried about the sequential slowdown. With the private sector unwilling to invest, the RBI still hiking rates, and global growth likely to slow later in the year, I am not sure where we find additional growth momentum," he had said.
"I am worried that earlier we would be lucky if we hit 5 per cent growth. The latest October-December Indian GDP numbers (4.4 per cent on year ago and 1 per cent relative to the previous quarter) suggest slowing growth from the heady numbers in the first half of the year," he added.
"My fears were not misplaced. The RBI projects an even lower 4.2 per cent for the last quarter of this fiscal. At this point, the average annual growth of the October-December quarter relative to the similar pre-pandemic quarter 3 years ago is 3.7 per cent. This is dangerously close to our old Hindu rate of growth! We must do better."
What is Hindu rate of growth?
Hindu rate of growth is a term describing the low Indian economic growth rates the country faced from the 1950s to the 1980s, which averaged around 4 per cent. Before the economic reforms brought in by former prime minister P.V. Narasimha Rao in 1991, including liberalisation and privatisation, the state control and socialist policies of the government had led to a tepid GDP growth rate of 1 per cent.
The term was coined by Raj Krishna, an Indian economist, in 1978 to describe slow growth.
In the book, The New Oxford companion to Economics in India, the term gets a better explanation. "The Hindu Rate of Growth, a polemical device intended to draw attention to the meagre 3.5 per cent growth rate experienced by India over the long run. The fact that this rate of growth remained steady through changes in governments, wars, famines, and other crises, made it for him an inherently cultural phenomenon — hence the name."
It is usually used to suggest that the country is satisfied with a tame growth rate.
For the slow economic growth to be called Hindu rate of growth, it needs to be persistent and in line with per-capita GDP. It also needs to factor in population growth.
According to liberal economists, the word doesn't have anything to do with the Hindu religion or the concepts of karma, but is attributed to the low economic growth resulting from the protectionist and interventionist policies of the government, notes Business Standard.
