India has come very close to ‘Hindu rate of growth’, why Raghuram Rajan said this scary thing

Former Reserve Bank of India (RBI) Governor Raghuram Rajan on Sunday said that India is very close to ‘Hindu growth rate’. He made this statement citing lack of private sector investment, high interest rates and slowing pace of global growth. According to Rajan, the national income estimates released by the National Statistical Office (NSO) last month indicate a gradual moderation in quarterly growth, which is a matter of concern. It is known that the growth rate of the Indian economy was at a low level of 4 percent from 1950 to 1980s, which is also known as ‘Hindu rate of growth’. The term ‘Hindu growth rate’ for slow growth was coined in 1978 by the Indian economist Raj Krishna.

According to the NSO, the gross domestic product (GDP) growth slowed to 4.4 per cent in the third quarter of the current financial year, from 6.3 per cent in the second quarter (July-September) and 13.2 per cent in the first quarter (April-June). The growth rate in the third quarter of the last financial year was 5.2 per cent. Rajan said, “Optimists will certainly talk about the improvement made in the previous GDP figures, but I am worried about the gradual softening.” The private sector is not inclined to invest. RBI continues to raise interest rates and global growth is expected to slow down further in the coming period. In such a situation, I do not know how the growth will pick up.

Rajan said – even if 5% growth is achieved…

The former RBI governor was asked a question about India’s growth rate in the upcoming financial year (2023-24). In response, Rajan said, “Even if we get 5 per cent growth, it will be our luck.” GDP figures for October-December show that growth will weaken in the first half of the year. He said, ‘My apprehensions are not without reason. RBI has even projected a growth rate of 4.2 per cent in the last quarter of the current financial year.

Why did Rajan say that this is a scary thing?

Raghuram Rajan said that at this point of time, the average annual growth for the October-December quarter is 3.7 per cent as compared to 3 years ago. This is very close to the old Hindu growth rate and it is scary. We have to do better than this. However, he admitted that the government is working on the infrastructure investment front, but the impact of the thrust on manufacturing is yet to be seen. Describing the performance of the service sector as the bright side, he said that the role of the government is not significant in this.

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