What is the Hindu rate of growth mentioned by PM Modi, and how did India’s economy grow after Independence?

What does the expression mean? Who coined it?

What is the Hindu rate of growth?

The term “Hindu” in the Hindu rate of growth does not, in fact, have a negative connotation. According to The New Oxford Companion to Economics in India, economist Raj Krishna coined the expression as “a polemical device intended to draw attention to the meagre 3.5 per cent growth rate experienced by India over the long run. The fact that this rate of growth remained steady through changes in governments, wars, famines, and other crises, made it for him an inherently cultural phenomenon—hence the name.”

Notably, Krishna’s views diverged from the ideologies of the Congress-led governments of the time. Fellow economist Pulapre Balakrishnan described him as “Chicago-trained and, in the political climate of the time, with a reputation for being somewhat of a right-winger” in his essay, “The recovery of India: Economic growth in the Nehru era”.

Is Nehru to blame for the Hindu rate of growth?

Prof Balakrishnan analysed India’s growth rate during the Nehru era (1951-64) in an essay for Uma Kapila’s Indian Economy since Independence. He noted that India’s GDP and GDP per capita growth rates had risen from 0.9% and 0.1% during colonial rule (1900-1946) to 4.1% and 1.9% during 1950-1964. Similarly, India’s 4.1% GDP growth exceeded China’s 2.9% in the same period, while lagging behind Korea’s 6.1%. In contrast, the US, UK, and Japan achieved 3.6%, 1.9%, and 2.8% GDP growth between 1820 and 1992.

Prof Balakrishnan argued that Raj Krishna’s claim, that India ranked below 100 economies through the late 1970s, was based on per capita GDP, “masking the degree of progress made in the Nehru era.” Notably, population growth accelerated from 0.8% annually (1900-1946) to 2% during the Nehru era. Had population growth remained at colonial rates, per capita income growth would have exceeded 3%, more than double the US and UK rates (1820-1992) and surpassing Japan.

In 1982, Krishna credited India’s strides towards capacity-building and self-reliance as key for future growth. “If today we can boast of a large measure of self-reliance, it is because considerable capacity has been created in the metallurgical, mechanical, chemical, power and transport sectors. These sectors are basic precisely because they are equally indispensable for defence, for large-scale consumer goods production, for small-industry development and rural development,” he said.

And when did India surpass this growth rate?

GDP growth data indicate that India had surpassed the Hindu rate of growth long before the 1991 liberalisation reforms were introduced. This was argued by economist Baldev Raj Nayar in a 2006 Economic and Political Weekly article. He said while liberalisation accelerates growth, “it is equally true, as more recent work by economists has shown, of the within-system economic policy reforms of the 1980s.”

Between 1956 and 1975, India’s average annual GDP growth was 3.4%, matching the Hindu rate of growth. However, growth averaged 5.8% between 1981 and 1991, a full decade before the 1991 crisis and reforms. Economists such as Arvind Virmani and Arvind Panagariya have identified 1980, or the 1980s, as the turnaround, crediting reforms by Indira Gandhi (post-Emergency) and Rajiv Gandhi.

Nayar argues the first liberalisation phase began in 1975, the Emergency year itself, citing GDP growth averaging 5.6% from 1976-2006, well above the Hindu rate.