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Business News/ Economy / The history behind ‘Hindu rate of growth’, in charts
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The history behind ‘Hindu rate of growth’, in charts

India’s GDP growth rate fell below 4% often in the first few decades of independence, and the pace was slower than some of its peers that were at similar stages of development

Former RBI governor Raghuram Rajan. (File photo)Premium
Former RBI governor Raghuram Rajan. (File photo)

Earlier this week, former Reserve Bank of India governor Raghuram Rajan warned that slowing global growth, high interest rates, and muted private sector investment had brought India"dangerously close" to “the Hindu rate of growth".

The term “Hindu rate of growth" was coined by the late economist Raj Krishna in 1978 to describe India’s low rate of economic growth between the 1960s and 1980s, when it averaged around 4%. It meant to indicate that the country was content with poor growth amidst a period of socialist policies in early decades of independent India. A wave of liberalized policies after 1991 put India on a fast-growth track.

Here’s a chart showing how India’s GDP growth has fared since the early 1960s: the shaded part shows frequent periods of growth rate falling below the 4% mark—until the 1990s:

This was a point of note because other peers at a similar stage of development, especially in eastern and Southeast Asia, were growing much faster at that time than India.

Rajan was referring to the sequential slowdown in the quarterly growth in the December-ended quarter, as revealed by the latest estimate of national income released by the National Statistical Office (NSO) last month. In the backdrop of an impending global economic slowdown, along with unwillingness of the private sector to invest due to high interest rates, he said, “I am not sure where we find additional growth momentum."

After expanding at 13.2% in April-June 2022, GDP growth slowed to 6.3% in the September quarter and to 4.4% in the October-December quarter.

Soumya Kanti Ghosh, chief economic adviser at SBI, noted in a report dated 7 March that quarterly growth numbers should be avoided for any serious interpretation, and savings and investments as a share of GDP were more positive.

According to SBI’s report, the government’s gross capital formation reached 11.8% in 2021-22, up from 10.7% in 2020-21, having a domino effect on private sector investments, which increased from 10% to 10.8% during the same period. However, these were lower than pre-pandemic figures.

On a yearly basis, the Indian economy is projected to grow at or near 7% in fiscal year 2022-23, making India the fastest growing emerging economy in the country. However, not only is the growth expected to slow down (to 6.4%, as per the RBI) in the wake of global risks, but several worries over lack of robust investment and demand.

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ABOUT THE AUTHOR
Manjul Paul
Manjul Paul is a data journalist. She joined Mint in October 2021. Previously, she worked witth the Reuters polling team in Bangalore as a correspondent for four years.
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Published: 09 Mar 2023, 07:42 PM IST
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