Hindu rate of growth: Where does the term come from and what it means

Former Reserve Bank of India (RBI) Governor Raghuram Rajan on Sunday said that India is "dangerously close" to the Hindu rate of growth due to subdued private sector investment, high-interest rates and slowing global growth.

Rajan said that the slowing sequential quarterly growth was "worrying".

What is the 'Hindu rate of growth'?

The Hindu rate of growth is a term used to describe India's low rate of economic growth for a prolonged period. It is generally used to show that the country is satisfied with the slow growth rate.

The term was first used by the late economist Raj Krishna in 1978 to refer to the low rate of economic growth in the pre-liberalisation era. Krishna explained it against the backdrop of socialist economic policies. He also used to teach at the Delhi School of Economics (DSE).

It must be noted that the slow growth rate is called the Hindu rate of growth only if it is persistent and is accompanied by low per-capita GDP, with population growth factored in.

The most recent example of this is the 1980s, just before PV Narasimha Rao's economic reforms. India's annual population growth rate was over 2 per cent, and the per-capita GDP growth rate, with 3.5 per cent GDP growth, was a meagre 1 per cent.

According to Krishna, this was due to the socialist policies of state control and import substitution. It is also said that in one of his lectures, Krishna said that "no matter what happens to the economy, the trend growth rate in India will be 3.5 per cent."

That changed when liberalisation, privatisation and globalisation (LPG) reforms were initiated in 1991 when India faced a balance of payments crisis.

Why the term 'Hindu'?

According to reports, several economists believed that the term "Hindu" was used to link the belief in Karma and Bhagya with the slow growth. However, later liberal economists and historians like Paul Bairoch rejected this connection and instead attributed the low growth rate to the then governments' protectionist and interventionist policies.