Understanding the Concept of the Hindu Rate of Growth

• As per the latest national income estimates released by the National Statistical Office (NSO) in March 2023, there has been a worrisome sequential slowdown in quarterly growth.
• The term Hindu rate of growth is used to refer to the low economic growth rate that the Indian economy experienced from the 1950s to the 1980s, which averaged around 4%. This term was introduced by Indian economist Raj Krishna in 1978.
• Factors contributing to the risk:
  • Weakened private sector investment, high-interest rates, and a global economic slowdown have the potential to hinder India's economic growth and return us to the Hindu rate of growth.
  • Despite the government's claim of prioritizing infrastructure investment, the expected boost in manufacturing has not yet yielded the desired results.
• Key Observations:
  • According to Rajan, the success of the production-linked incentive (PLI) scheme should be evaluated based on the number of jobs created and the cost per job.
    • Government statistics indicate that only 3% of the projected jobs have been created. Even if the scheme meets the government's full expectations, it will only generate approximately 0.6 crore jobs.
  • Rajan also pointed out that most developed economies are primarily service-based, indicating that a country can have a large economy without a significant manufacturing presence.
  • India needs to focus on both manufacturing and services to create the desired number of jobs. Services are not just about high-tech startups, they also include semi-skilled jobs in sectors like tourism, transportation, retail, hospitality, and more.

Further Information:

• Gross Domestic Product (GDP) is the total monetary value of all final goods and services produced within a country's geographical boundaries over a specified period (typically a year).
• Production Linked Incentive (PLI) is a scheme designed to incentivize companies for incremental sales from products manufactured domestically. The scheme encourages foreign companies to establish units in India, but it also aims to motivate local companies to set up or expand existing manufacturing units, generate employment, and reduce India's dependence on imports.