Raghuram Rajan’s Warning About the ‘Hindu Rate of Growth’: What Does it Mean?

In recent news, former Reserve Bank of India (RBI) governor Raghuram Rajan expressed concern about India being dangerously close to the “Hindu rate of growth,” citing subdued private sector investment, high interest rates, and a slowdown in global growth as contributing factors. This term refers to India’s slow economic growth rate, which has remained around 4% for several decades. Economist Raj Krishna first coined the term in 1978 to describe India’s sluggish economic growth in the 1950s to the 1980s.

Raj Krishna, who was teaching at the Delhi School of Economics at the time, used the term as a polemical device to draw attention to India’s meagre 3.5% growth rate 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. According to The New Oxford Companion to Economics in India, this term is often regarded as derogatory concerning India’s inability to meet its economic potential. However, Raj Krishna did not use the term critically or to denigrate Hindus, the report adds.

Raghuram Rajan’s remark came after the National Statistical Office (NSO) released its report, showing a sequential slowdown in the latest estimate of national income. The country’s GDP growth slowed to 4.4% in the third quarter (October-December) compared to 6.3% in the second quarter (July-September). PTI quoted Raghuram Rajan as saying, “The latest October-December Indian GDP numbers suggest slowing growth from the heady numbers in the first half of the year… The RBI projects an even lower 4.2 per cent for the last quarter of this fiscal.” He added, “This is dangerously close to our old Hindu rate of growth! We must do better.”

India’s low economic growth rate is a significant concern for the country’s policymakers. In recent years, the Indian government has launched several initiatives to spur economic growth, such as the “Make in India” campaign to attract foreign investment and the “Digital India” program to promote technology adoption. However, these initiatives have not yielded the desired results, as India’s economic growth rate remains sluggish.

The current government’s efforts to improve economic growth include promoting small businesses and startups, reducing bureaucratic hurdles, and creating a favourable environment for foreign investment. However, these initiatives are yet to deliver the desired outcomes.

The COVID-19 pandemic has also hit the Indian economy hard, with millions of people losing their jobs and many businesses shutting down. The country’s economic growth rate contracted by 23.9% in the first quarter of the financial year 2020-21, the worst contraction in decades. However, the Indian economy has shown signs of recovery, with the manufacturing and services sectors bouncing back in recent months.

In conclusion, the term “Hindu rate of growth” refers to India’s sluggish economic growth rate, which has remained around 4% for several decades. Economist Raj Krishna first coined the term in 1978 to describe India’s economic growth in the 1950s to the 1980s. Former RBI governor Raghuram Rajan’s recent cautionary note about India being dangerously close to this rate of growth highlights the need for policymakers to take urgent measures to boost the country’s economic growth. While the Indian government has launched several initiatives to spur economic growth, their effectiveness remains to be seen. The COVID-19 pandemic has further complicated the situation, but the Indian economy has shown signs of recovery in recent months.