Is India Heading Towards Hindu Rate Of Low Growth As Raghuram Rajan Says?

The ruling Bharatiya Janata Party may be upset by the utterances of noted economist and former RBI governor Raghuram Rajan that India may be heading towards Hindu rate of economic growth meaning the economy is drifting towards an era of low growth. But this is something worth pondering over by the BJP led Modi government so as to take corrective measures to reverse the trend rather than getting angry and pouncing on Rajan for flagging an issue that needed serious debate.

After clocking over 8 per cent growth in July-September quarter of 2022-23, the GDP growth slipped to 4.4 per cent in October-December quarter and it is projected at 4.2 per cent growth in January-March quarter of 2022-23. This is a clear indication that the GDP growth is on a declining trend. India may be among the fastest growing economies in the World but the global economy is slowing down and geo political situation is not that conducive to push growth. That apart domestically, private investment has not picked up to the desired level. Further, higher than trend inflation will act as a dampener coupled with slowing exports growth. These are immediate and short-term vows.

But there is need to analyse in a serious and professional manner if there is some merit in what Raghuram Rajan is saying. Rajan’s staunch critique Subramanian Swamy, who is an Harvard economist, too admits that GDP growth during the few quarters before the Covid Pandemic in 2019 had started declining in India and Prime Minister Narendra Modi needed to take measures to reverse it. Modi’s announcement that India would be a $5 trillion economy by 2024-25 was a piped dream and not a realistic target in the timeframe he had earlier envisaged.

In fact if one analyses the quarterly GDP figures put out by Central Statistical organisation, it is quite evident that non-Congress led governments have not done well in achieving high economic growth, be it Janata Government, Vajpayee-led NDA government or BJP led Modi government. Some structural reforms might have happened during their period, but somehow they could not take the economy to a higher growth trajectory. Even among Congress governments, Rajiv Gandhi did not do all that well in achieving high growth even though some attempts were made to reform the economy. But there was total mismanagement of the economy during Rajiv Gandhi regime despite the fact his government got the highest ever mandate from the people. But one thing is clear that ruling dispensation got jolt whenever the trend growth during their regime was low.

India did not do all that badly in economic growth during the era of Prime Minister Jawaharlal Nehru despite the fact the nation adopted socialistic pattern of economic development. Given the magnitude of the problems after independence due to partition, his achievements were commendable in building the national economy. During Nehru’s era the average growth was 4.5 per cent. This was not bad considering India inherited a war-torn and drought stricken economy with very few industries. To top it all, 4.5 per cent growth was achieved despite population growing rapidly negating some growth. In the present day situation wherein population control has been achieved by and large has certainly acted as catalyst to economic growth.

A deeper analysis of quarterly growth data during the last three decades showed NDA government did not perform all that well. Government statistics show that during the last 106 quarters, 23, quarters achieved a growth rate of less than 5 per cent and the rest higher than 5 per cent growth. Of these 23, 10 quarters were during Modi period, 7 were during Vajpayee’s NDA regime and 6 were during UPA. World Bank data showed that India, which was achieving an average 4.5 per cent growth during Nehru era clocked negative growth after the war in 1965 coupled with drought situation. Of course India came out of this crisis with agriculture booming after the green revolution. But the Bangladesh war in 1971 pushed the Indian economy to the negative territory again in 1972 but the economy recovered during Indira Gandhi’s regime despite a global oil crisis in 1973.

There was however some political turmoil because of the emergency. After two years of Janata regime, Indian economy slipped in 1979 only to recover after Indira Gandhi came to power. But what is noteworthy is economic growth has been below par both during Vajpayee’s regime and Modi’s era. Vajpayee witnessed economic sanctions after Pokhran Nuclear test in 1998, which was followed by Kargil War. Modi too faced unprecedented Covid Pandemic in 2019. Both Vajpayee and Modi did carry out and continued structural reforms but none can deny the fact that Both Narasimha Rao government during 1991-96 and UPA government led by Manmohan Singh, 2004-14, did achieve better economic growth despite the fact they too faced crisis like Babri Masjid, balance of payment problem and 2008 global financial crisis.

Of course, Manmohan Singh did face slowing economic growth during the last two years of his regime due to policy paralysis and scams like2G and Coal. But there is also a lesson to political parties. People do not vote out ruling dispensation if the economic slowdown is due to global situation like 2008 global economic crisis or Covid in 2019. But if it is due to joblessness arising out of slowing economy, then people do react differently as India shining campaign did not lead to favourable electoral outcome for Vajpayee government.

So instead of blindly attacking Raghuram Rajan for flagging a serious issue, BJP will do well to take necessary correctives as 2024 general elections are not far away. Economic well-being of people may not be sufficient condition to win elections but it is certainly a necessary condition. (IPA Service)