Hindu Rate of Growth [UPSC Notes]

Responding to the recently released GDP data (March 2023), former RBI governor Raghuram Ranjan mentioned that India is ‘dangerously close’ to the Hindu rate of growth. In this context, understand what is the Hindu rate of growth for the IAS exam Indian economy segment.

What is the Hindu Rate of Growth?

• The National Statistical Office (NSO) released the latest national income estimates (in March 2023) and it shows a sequential slowdown in the quarterly growth which is looking worrisome.
• The Hindu rate of growth is a term used to describe the lower rate of economic growth observed in the Indian economy during the 1950s to 1980s and it averaged around 4%. This term was coined by an Indian economist, Raj Krishna in 1978.
• Reasons for the perceived risk:
  • Subdued private sector investment, high-interest rates and slowing global growth are capable enough to retard our economic growth and take us back to the Hindu rate of growth.
  • Though the government has said that it is giving the necessary push to infrastructure investment, the manufacturing thrust is yet to pay dividends.
• Observations made:
  • Mr. Rajan mentioned that the success of the production-linked incentive (PLI) scheme is to be measured in terms of how many jobs were created and at what price per job.
    • Based on statistics provided by the government, only 3% of the predicted jobs were created. And even if this scheme meets the government’s full expectations, even then it will create only 0.6 crore jobs.
  • He also mentioned that most developed economies of the world are largely service economies and one can be a large economy even without having a large presence in manufacturing.
  • India has to work on both manufacturing and services to create the level of jobs that we aim for. Services are not just about unicorns, it also accounts for semi-skilled jobs in tourism, transport, retail, hospitality, etc.

Additional Information:

• Gross Domestic Product (GDP) is referred to as the total monetary value of all the final goods and services produced within the geographic boundaries of a country, during a given period (usually a year).
• Production Linked Incentive (PLI) scheme is a scheme that aims to give companies incentives on incremental sales from products manufactured in domestic units. The scheme invites foreign companies to set up units in India, however, it also aims to encourage local companies to set up or expand existing manufacturing units and also to generate more employment and cut down the country’s reliance on imports from other countries.

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