Home   »   Economy   »   The Hindu Rate Of Growth

What Is The Hindu Rate Of Growth?, Rajan V/S SBI Debate

What Is The Hindu Rate Of Growth?

 

In Thus Article, ”What Is The Hindu Rate Of Growth?”, We Will Discuss: Context Of The Hindu Rate Of Growth, What Is The Hindu Rate Of Growth?, SBI’s Research On Hindu Rate Of Growth?, etc.

Context Of The Hindu Rate Of Growth

The Hindu Rate Of Growth In News?

  • Former Reserve Bank of India Governor Raghuram Rajan recently said that India’s economy is “dangerously close” to the ‘Hindu’ rate of growth.
  • He blamed weak private sector investment, high interest rates and deceleration in global growth.
  • Countering his statement, the State Bank Of India on March 07, 2023, released a report ‘Ecowrap’ which shows the notion of the ‘Hindu’ rate of growth has no basis in current situation.

Background

  • Raghuram Rajan’s remark came after National Statistical Office (NSO) showed a sequential slowdown in the latest estimate of national income. The country’s GDP growth was seen to slow down to 4.4% in the third quarter (October-December) against the 6.3% in the second quarter (July-September).
  • So, India’s quarterly Y-o-Y GDP growth has been in a declining trend in FY23 sequentially, prompting arguments that India’s growth is reminiscent of a pre – 1980 Raj Krishna coined growth rate.

What Is The Hindu Rate Of Growth?

  • Who Coined? The term Hindu rate of growth was coined by economist Raj Krishna in 1978.
  • Why Coined? He used it to denote the around 4 per cent growth in GDP from the 1950s to the 1980s.
  • What Happened At That Time? The fact that the economic growth rate remained steady even though governments changed and despite wars and other crises made it for Raj Krishna ”an inherently cultural phenomenon” — that’s why he named it, ”The Hindu Rate Of Growth.”
  • A Term Used In Negative Sense: The Hindu Rate Of Growth is often regarded as a derogatory phrase concerning India not being able to meet its economic potential, according to A Dictionary of Politics and International Relations in India.

SBI’s Research On Hindu Rate Of Growth?

  • An SBI research report on March 07, 2023 dismissed arguments that India is dangerously close to Hindu rate of growth saying such statements are “ill-conceived, biased and premature” in the wake of the recent GDP numbers and the available data on savings and investments.”
  • It said, interpretations of GDP growth based on noisy quarterly numbers is a game of smoke and mirror,” said the SBI report ‘Ecowrap’.
  • SBI research on The Hindu Rate Of Growth says that, The Hindu Rate Of Growth is a key economic indicator shows that only half of capital is now needed for the next unit of output in India, which is on a ‘sound footing’ and notions of ‘Hindu rate of growth’ is ill-conceived.
  • SBI Research is confident of savings, investments and the GDP, no matter the deceleration in recent ‘noisy’ quarters and should be best avoided for any serious interpretation.
  • Prima facie, a careful analysis shows that Incremental Capital Output ratio (ICOR), which measures additional units of capital (investment) needed to produce additional units of output, has been improving.
  • ICOR which was 7.5 in FY12 is now only 3.5 in FY 22. Clearly, only half of capital is now needed for the next unit of output.
  • Such reducing ICOR in the current years reflects a relative increasing efficiency of capital.

Sharing is caring!

FAQs

Q. Who Coined The term Hindu rate of growth?

A. The term Hindu rate of growth was coined by economist Raj Krishna in 1978.

Q. How Does The Hindu Rate Of Growth is a key economic indicator?

A. The Hindu Rate Of Growth is a key economic indicator shows that only half of capital is now needed for the next unit of output in India, which is on a ‘sound footing’ and notions of 'Hindu rate of growth' is ill-conceived.

Leave a comment

Your email address will not be published. Required fields are marked *