SBI Research quashes Raghuram Rajan’s remark on India’s ‘Hindu rate of growth’

• Shubham
• 07 March, 2023

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By: Shubham Ghosh

The argument that India is going towards a ‘Hindu rate of growth’ is “ill-conceived, biased and pre-mature” when weighed against the respective data on savings and investments, said the State Bank of India (SBI) Research in its Ecowrap report.

The term ‘Hindu rate of growth’ was coined by economist Raj Krishna in 1978, which denoted the economic growth of about 3.5-4.0 per cent in terms of GDP during 1947-1980.

“India’s quarterly sequential Y-o-Y GDP growth has been in a declining trend in FY23. It has been argued in select quarters that India is going towards Raj Krishna coined rate of Growth (3.5-4 per cent) that predominated the growth in the period of 1947-1980. We find the argument ill-conceived, biased and pre-mature at its best when weighing the numbers against the data on savings and investments,” the Ecowrap report said.

The SBI Research report comes on the backdrop of former Reserve Bank of India governor Raghuram Rajan, having told media that economic growth of India was close to that of Raj Krishna coined term ‘Hindu rate of growth’.

Further, SBI Research argued institutional share of the Public and Private sectors in total Gross Capital Formation (GCF) has been nearly constant since FY12 at around 10 per cent and 34 per cent of GDP, respectively.

According to World Bank, the gross capital formation consists of investments on addition to the fixed assets of the economy plus net changes in the level of inventories.

Gross capital formation by the government touched a high of 11.8 per cent in 2021-22, up from 10.7 per cent in 2020-21. This, the SBI report said, also had a domino effect on private sector investment that jumped from 10 per cent to 10.8 per cent over the same period.

“In fact, the trends in GCF to gross output ratio or the plough back of funds for the creation of fresh capacity shows that for public administration the ration attained a fresh peak in 2021-22 owing to the emphasis on capital expenditure in recent budgets,” the report said.

Moreover, it argued that household savings in India increased sharply during the pandemic period on account of sharp accretion in financial savings such as deposits.

(ANI)