Decoding the costs of bad growth

India cannot let political narratives around the 'Hindu rate of growth' deflect questions on inequitable progress

Conventional thinking from mainstream economists down to the average citizen has it that GDP growth is desirable and good. India now reports high growth, with the last announcement giving a surprisingly robust GDP growth of 8.2%. But the nation was not always in that league, and indeed never was, right up to the 1990s when Manmohan Singh introduced the era of economic reforms. Before that, largely, the economic cart of a newly independent nation remained stuck at a growth of about 3.5% on average and 1.3% per capita, all the way from 1947 to 1980. This state came to be called the “Hindu rate of growth”, a term that in its origins was entangled with the Hindu way of life, but has subsequently been used almost as a harmless cliché for slow growth.

The phraseology is now under attack, with Prime Minister Narendra Modi leading the charge. The continued popularity of the usage is indicative of “a mentality of slavery”, the Prime Minister said last week. In his words: “...an attempt was made to prove that the reason for India’s slow growth rate was our Hindu civilisation and Hindu culture.”

As the Indian economy races ahead, the Prime Minister has asked: “Have you read anywhere about the rapid growth that India is experiencing today? Have you heard about it anywhere? Does anyone call it the Hindu rate of growth?” The remarks came in a speech earlier this month, highlighting on the one hand what the government sees as high achievement on the GDP growth front and on the other hand, an unstated condemnation of the post-independence socialist approaches and policies that, it is claimed, failed India, a failure that cannot be labelled for Hindu society as a whole.

In a 2007 paper, economists Kaushik Basu and Annemie Maertens of Cornell University referred to the “Hindu rate of growth” as a “tongue-in-cheek expression” coined by the late economist Raj Krishna “to capture the frustration of India’s planners” struggling with what appeared to limit the India growth story. “No matter what they did, growth seemed, invariably, to revert to 3.5% per annum, almost as if this magic figure was written in the land’s scriptures,” they wrote in a footnote. But the roots of that coinage go back to 1973 and to the bureaucrat B P R Vithal, who was a member of the 10th Finance Commission.

Development in context

Vithal’s thesis was complex, in part problematic, and has been criticised, but this is criticism not of the kind the BJP has in mind. Vithal’s case was centred around preserving what he called the Hindu way of life, which he argued would break down if growth accelerates. In that sense, the roots of the term that is now being labelled as denigrative of a religion or a community are not that at all. Indeed, they are at least in part based on arguments that the Right Wing might see some merit in, given that they are almost fixated on an Indian view rooted in a religion and reject aspects of Western progress.

Vithal did not decry India’s historic low growth and, on the contrary, alerted economists and policymakers to the risks of higher growth merely as a target number, arguing to the effect that any faith in a higher rate of growth as a panacea will lead to a breakdown in society as citizens become slaves of Western-style consumption.

Here was an economist not limited to numbers and how they would be achieved, but one who delved right into the sociology of growth and what it brings for a nation like India. It should be clear that India’s socio-political dynamic, coupled with its claims of high growth, is already bringing some huge problems that are worthy of serious discussion, rather than the idea of Hindu pride that is supposedly hurt when poor growth is associated with the land. The arguments embedded in the origins of the phraseology and the current questions raised about it bring into sharp relief issues around the structure and the quality of India’s growth story. Is growth in and by itself good, a free radical that signals energy and achievement that will take the nation and its people to a higher ground? What are the downsides? Can the growing inequality sustain, or will the present arrangement break down with disastrous consequences?

Ironically, the conversation has hit the headlines just around the time of ugly excesses of corporate power, bordering on national blackmail, seen in the case of the Indigo fiasco. By force-landing the country’s biggest airline with a massive cancellation of schedules that were then attributed to an unimplemented safety policy, Indigo gave India a taste of the risks of companies that are too powerful to control and thereby too big to fail. At a different scale, but of a similar kind, was the death of 25 people earlier this month at a nightclub in Goa, with the owners copying the playbook of Mehul Choksi and Vijay Mallya to flee the nation. The airline brought national disaster. The nightclub was a more localised story. But both mock the nation and its growth story in their own ways, highlighting the hidden costs of a faster growth that has beaten the “Hindu rate of growth” but has brought us a disaster that unfolds at periodic intervals to shock the nation and ridicule its governance structures.

In that sense, faster growth is good, but there is a condition called “bad growth”. To quote an old HDR report by the UNDP: “Determined efforts are needed to avoid growth that is jobless, ruthless, voiceless, rootless and futureless.” But if that is what we get with faster growth, then the “Hindu rate of growth” might even begin to look good.

(The writer is a journalist and faculty member at SPJIMR; Syndicate: The Billion Press)