‘Hindu rate of growth’ is a phrase we must erase
2 min read . Updated: 06 Mar 2023, 11:13 PM IST
PremiumIt is unfortunate that Raghuram Rajan dusted off a dubious phrase of pre-1991 vintage to warn India of potentially weak economic growth. We must not resort to gratuitous labels.
That this is an age of sensitivity filters for all articulation only stokes the surprise of ‘Hindu rate of growth’ staging a return in our public discourse. This term was reportedly used by Raghuram Rajan, former governor of the Reserve Bank of India, in whose view India is “dangerously close" to it now, given subdued private-sector investment, rising rates of interest and a slowing global economy. As economists know, the phrase in question refers to a sluggish pace of economic expansion, as seen for about four decades after we won freedom, a gloomy phase that saw an average annual clip of under 4%, picking up only in the late 1980s. The ‘Hindu’ tag, in particular, has been controversial and unfair. It had more or less gone out of use after a market-oriented shift in Indian policy lifted our economy’s growth path in the 1990s. That Rajan has dusted it off as a warning is a cause for dismay. The label deserves to fade away, failing which we should all resolve to end its use. We did not call the covid bug a ‘Chinese virus’ for good reason, to avert gratuitous labelling, and the same logic applies here too.
As students who encounter it soon discover, ‘Hindu rate of growth’ conveys little and confuses more. While the term was around in the 1960s, it gained academic currency in the late 1970s, thanks to a paper by Raj Krishna, an economist who argued that our weak growth back then was not on account of a resource or talent deficiency, but the result of a restrictive policy environment. Our economy was held back by dismal productivity, an inefficient public sector and a sarkari maze of red tape, Krishna had meant. His paper aimed no finger at any religion or culture as a determinant. It did, however, refer to civilizational stagnancy as an outcome of resistance to reforms down the ages of our history. If this nuance is lost, the term can sound rather offensive, like a put-down; and with the past so fiercely contested in domestic politics, discretion acquires an even higher premium. If Rajan wishes to enter public life at some juncture (he joined Rahul Gandhi’s Bharat Jodo Yatra), he’d be lucky if his choice of words do not come back to haunt him. Apart from being needless, the phrase suggests a cultural context for poor economic performance. Our big problem for long was an economy held back by over-centralized resource allocation, with too small a role for market forces. If anything, we suffered a ‘statist rate of growth’. Once India began to roll back statism and empower market mechanisms by easing a rigid framework of rules, as done in 1991, famously, we began to expand output by high single-digit rates year after year. India’s economy was not too hidebound to move fast and break myths, it became clear, and we had its rapid emergence to show for it.
In issuing his note of caution, Rajan could have used neutral language. Our economy did slump in the aftermath of a currency shock half a decade ago. In fact, covid struck while India was in the grip of a slowdown. Although the bug took away nearly two years of growth, hopes of a V-shaped revival have traced an infra-led surge in state spending. And while a likely GDP bounce of around 7% in 2023-24 has spelt optimism, it will prove hard to sustain if we do not attract enough private capital for a full-fledged boom. Separately, the Centre has displayed a yen for central control in too many spaces. So, on balance, we do face the risk of a slide-back to statism. But let’s not mis-label it.