New Delhi: Sounding a serious warning, former Reserve Bank of India governor and professor of finance at the University of Chicago Raghuram Rajan has said that with subdued private sector investment, high interest rates and slowing global growth, India is “dangerously close” to the Hindu rate of growth.
Rajan referred to sequential slowdown in quarterly growth seen in the latest estimate of national income released by the National Statistical Office (NSO) last month. GDP in the third quarter (October-December) of the current fiscal slowed to 4.4% from 6.3% in the second quarter (July-September) and 13.2% in the first quarter (April-June).
‘Hindu rate of growth’, a dig taking off from the market term ‘secular growth’ (growth unaffected in the short term), was coined by Chicago school economist Raj Krishna in 1978 to describe low Indian growth rates of about 4% in the 1960s and 1970s.
“Of course, the optimists will point to the upward revisions in past GDP numbers, but I am worried about the sequential slowdown. With the private sector unwilling to invest, the RBI still hiking rates, and global growth likely to slow later in the year, I am not sure where we find additional growth momentum,” Rajan told PTI in an email interview.
Growth rates in the fiscal year 2023-24 will be important, Rajan said. “I am worried that earlier we would be lucky if we hit 5% growth. The latest October-December Indian GDP numbers (4.4% one year ago and 1% relative to the previous quarter) suggest slowing growth from the heady numbers in the first half of the year,” he added.
“My fears were not misplaced. The RBI projects an even lower 4.2% for the last quarter of this fiscal. At this point, the average annual growth of the October-December quarter relative to the similar pre-pandemic quarter three years ago is 3.7%,” he continued. “This is dangerously close to our old Hindu rate of growth! We must do better.”
India 'Dangerously Close' to the Hindu Rate of Growth: Raghuram Rajan - The Wire
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