regular-article-logo Wednesday, 27 September 2023

India is ‘dangerously close’ to Hindu rate of growth, says Raghuram Rajan

Former Reserve Bank governor says sequential slowdown in quarterly growth is worrying

PTI New Delhi Published 06.03.23, 03:33 AM
Raghuram Rajan.

Raghuram Rajan. File picture

Former Reserve Bank governor Raghuram Rajan has said India is “dangerously close” to the Hindu rate of growth with private sector investment subdued, interest rates high and global growth slowing.

The Hindu rate of growth is a term to describe the low Indian economic growth rates — averaging around 4 per cent — from the 1950s to the 1980s. It was coined by Indian economist Raj Krishna in 1978.


Rajan said sequential slowdown in quarterly growth, as revealed by the latest estimate of national income released by the National Statistical Office last month, was worrying.

The gross domestic product in the third quarter (October-December) of the current fiscal slowed to 4.4 per cent from 6.3 per cent in the second quarter (July-September) and 13.2 per cent in the first quarter (April-June).

The growth in the third quarter of the previous financial year was 5.2 per cent.

“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 said in an email interview to PTI.

The key question is what Indian growth will be in fiscal 2023-24, Rajan said, adding: “I am worried that earlier we would be lucky if we hit 5 per cent growth. The latest October-December Indian GDP numbers (4.4 per cent one year ago and 1 per cent relative to the previous quarter) suggest slowing growth from the heady numbers in the first half of the year.

“My fears were not misplaced. The RBI projects an even lower 4.2 per cent 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 per cent.

“This is dangerously close to our old Hindu rate of growth! We must do better.”

Rajan is the Katherine Dusak Miller Distinguished Service Professor of Finance at The University of Chicago Booth School of Business.

On what measures the government should take to improve oversight after the Hindenburg allegations against the Adani group, Rajan said: “I don’t think the issue is of more oversight over private companies.”

The issue is of reducing non-transparent links between government and business, and of letting, indeed encouraging, regulators to do their job, he said.

“Why has Sebi not yet got to the bottom of the ownership of those Mauritius funds which have been holding and trading Adani stock? Does it need help from the investigative agencies?” Rajan wondered.

The US short-seller Hindenburg Research on January 24 accused the Adani group of accounting fraud and stock manipulation, allegations the conglomerate has denied as “malicious” and “baseless”.

Swiss envoy summoned

New Delhi: The external affairs ministry on Sunday summoned the Swiss ambassador to register the country’s protest against anti-India posters placed outside the United Nations building in Geneva.

Swiss ambassador Ralf Heckner was called to the ministry by secretary (west) Sanjay Verma to raise the issue of “unfounded and malicious anti-India posters” outside the United Nations building.

Sources said the ambassador told Verma that he would convey India’s concerns to Berne “with all the seriousness it deserves”.


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