Hindu rate of growth – The Core IAS

Hindu rate of growth


  • According to a new research paper, “the Indian economy cannot grow more than 5% over the coming decade in a business-as-usual scenario”.

 Hindu rate of growth?

  • Coined by late economist Raj Krishna in 1978.
  • Describes the slow growth in the country, which basically refers to the low pace of economic growth rates during 1950s to 1980s.
  • During this period, the Indian economy averaged around 4%.
  • Before conomic reforms of 1991, India’s economic growth remained stagnant and low, while per capita income averaged around 1.3%.
  • Only if the rate of growth is persistently slow and accompanied by low per-capita GDP, then it will be known as Hindu rate of growth but it has to factor in population growth as well.

Why this term?

  • The term came into being to show India’s contentment with the low growth rate, post-independence.
  • 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.
  • Many economists believed 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.
  • A small growth rate alone does not characterize the Hindu rate of growth.
  • A 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.

When did India outgrow the Hindu rate of growth?

  • The GDP growth rate data suggests that India started growing faster than the Hindu rate of 3.5% long before the crisis and reforms of 1991.
  • India’s average annual GDP growth rate between 1956 and 1975 was 3.4% almost exactly the Hindu rate of growth.
  • However, between 1981 and 1991 that is, a full decade before the crisis and reforms, India’s growth averaged 5.8%.

Features of Hindu Rate of Growth

The then features which led to the coining of this term were-

  • Low GDP growth rate: The term refers to the period from the 1950s to the 1980s when India’s economy grew at an average rate of around 3.5% per year, which was much lower than other developing countries.
  • Slow Industrialization: The industrial sector was dominated by a few public sector companies, and the private sector was heavily regulated.
  • Stagnant Agriculture: There was little investment in agriculture, and the sector was not given much priority in government policies.
  • License Raj: India had a socialist economic model with heavy government regulation. The License Raj system required permits and licenses for businesses, creating a bureaucratic and corrupt system that hindered innovation and entrepreneurship.
  • Import Substitution: India followed a policy of import substitution, where the government tried to develop domestic industries by protecting them from foreign competition. This led to a lack of competition, low quality of products, and high prices.
  • Inefficient Public Sector: The public sector dominated the economy, but it was inefficient, unproductive, and plagued by corruption. Public sector companies were often overstaffed and poorly managed, resulting in low productivity.
  • Lack of Foreign Investment: India was not attractive to foreign investors during this period, and there was little foreign investment in the economy. The government imposed strict controls on foreign investment, and the regulatory environment was not conducive to foreign investment.

Gross Domestic Product (GDP)

  • GDP (Gross Domestic Product) stands as a cornerstone in assessing the economic health and performance of a nation. It serves as a vital indicator for policymakers, economists, and analysts, providing valuable insights into the size, growth, and productivity of an economy.