Syllabus: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Meaning and Origin
- The Hindu rate of growth refers to India’s persistently low GDP growth (≈3.5–4%) from the 1950s to the 1980s.
- It indicates long-run real GDP stagnation, not religion-linked behaviour or cultural explanations.
- Coined by economist Raj Krishna (Delhi School of Economics) in the late 1970s to describe India’s structural growth trap prior to reforms.
Core Characteristics of the Hindu Rate of Growth
- Prolonged Low GDP Growth
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- Indian GDP remained around 3.5–4% annually for three decades.
- Per capita income grew slower due to high population growth, showing deep economic inertia.
- Stability Despite Shocks
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- Growth remained largely unchanged despite wars, droughts, famines, and political transitions.
- Economists saw this as a system-wide equilibrium reflecting policy rigidities.
- Licence–Permit–Quota Raj
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- Excessive industrial licensing, import controls, and price regulation suppressed productivity.
- High tariffs and strict import substitution policies limited competition and efficiency.
- A large public sector dominance reduced private innovation and investment.
- Mixed Economy with State-Led Controls
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- The state controlled core industries, credit allocation, trade, and foreign investment.
- Limited market participation and minimal foreign capital restricted growth acceleration.
Comparative and Historical Context
- East Asian Contrast
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- While India grew at ~3.5%, South Korea, Taiwan, Singapore achieved 7–10%, highlighting India’s relative underperformance.
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- Growth Turnaround Before 1991
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- Growth accelerated to ≈5.6–5.8% in the 1980s, even before liberalisation.
- This reflected gradual deregulation, reduced licensing, and partial internal reforms.
Contemporary Context
- The Prime Minister criticised the phrase as colonial, communalising, and misleading, arguing it unfairly associates Hindu culture with economic stagnation.
- The debate highlights how terminology frames economic narratives and influences public perception of India’s development journey.