Hindu Rate Of Growth

Published Mar 22, 2024

Definition of Hindu Rate of Growth

The term “Hindu Rate of Growth” is a controversial and somewhat derisive term that refers to the low economic growth rate experienced by India from the 1950s to the 1980s. Specifically, this period saw a growth rate of around 3.5%, which, when adjusted for population growth, amounted to a per capita income growth of about 1% per annum. The term was coined by Indian economist Raj Krishna to describe the sluggish growth, attributably to the inward-looking protectionist policies, extensive regulation, and extensive state intervention in the economy during this period.

Background

During the post-independence era, India adopted a mixed economy framework with a significant focus on self-reliance. This led to the establishment of large public sectors, protectionist policies including high tariffs, and an emphasis on import substitution industrialization. The aim was to lay the foundation for a strong industrial base and to protect the domestic economy from foreign competition. However, these policies also resulted in extensive bureaucracy and inefficiency, constraining private sector growth and innovation.

Impact of the Hindu Rate of Growth

The Hindu Rate of Growth had several significant implications for the Indian economy:

1. Persistent Poverty: The low growth rate meant that the economy was not expanding at a pace sufficient to significantly uplift the population out of poverty. Despite improvements in certain areas, the overall pace of poverty reduction was slow.
2. Industrial Stagnation: Heavy regulation and license requirements led to inefficiency and corruption, stifling competition, and productivity in the industrial sector.
3. Low Export Growth: Protectionist policies discouraged exports, leading to a negligible presence in international markets for Indian goods until the liberalization policies of the 1990s.
4. Technological Gap: With limited exposure to global competition and innovation, the technological development in India lagged, impacting productivity and overall economic growth.

Economic Reforms of 1991 and Beyond

The economic crisis of 1991 compelled India to implement sweeping economic reforms that focused on liberalization, privatization, and globalization. These reforms marked a significant shift away from the policies responsible for the Hindu Rate of Growth. The opening up of the economy led to an influx of foreign investments, technological advancements, and an increased focus on export-led growth. As a result, India experienced a notable acceleration in economic growth, significantly higher than the rates seen during the era of the Hindu Rate of Growth.

FAQs

Why is the term “Hindu Rate of Growth” considered derogatory?

The term is seen as derogatory because it seemingly attributes India’s economic underperformance to its predominant religion, Hinduism, which is misleading and inaccurate. The low growth rates were a result of specific economic policies, not religious beliefs.

How did the Hindu Rate of Growth affect India’s position in the global economy?

During this period, India’s global economic position remained relatively static and marginal. The economy was largely closed to foreign investment, and export growth was minimal, limiting India’s participation in the global economic boom of the post-World War II era.

What were the main factors leading to the end of the Hindu Rate of Growth?

The main factors were the sweeping economic reforms initiated in 1991, driven by an acute balance of payments crisis that forced India to seek an IMF bailout. These reforms included opening up the economy to foreign investments, deregulation, and privatization of state-owned enterprises, leading to increased growth rates.

Has India completely overcome the challenges associated with the Hindu Rate of Growth era?

While India has made significant progress since the economic reforms, challenges such as poverty, unemployment, and income inequality persist. Additionally, maintaining sustainable growth, managing environmental concerns, and ensuring equitable development remain ongoing challenges.

The Hindu Rate of Growth represents a crucial period in India’s economic history, underscoring the impact of policy decisions on a country’s economic trajectory. The shift towards economic liberalization from the 1990s onwards reflects a transformative change in India’s approach to economic growth and integration into the global economy.