August 06 , 2021
The Hindutva Rate of Growth
“The Hindu Rate of Growth” was a term used to describe the dismal economic performance of India in the years up to about 1990. When India gained independence, there were high hopes both there and in other Third World countries emerging from colonialism that they would rapidly catch up with the First World. Released from the shackles of servitude, it seemed like a natural conclusion that the gap between the poor and rich could and should close. But that convergence turned out to be much harder to achieve than most expected.
India seemed particularly blessed. It had a competent civil service, an educated elite, and substantial industry and railroad systems already developed under British rule. In addition, it had the benefit of the rule of law, democracy, and a leader in Nehru who was scrupulously clean and free of corruption, which was the scourge of many newly birthed nations.
But despite all these advantages, India consistently turned in poor performances in the decades after independence. Economic growth often trudged along at 3-4% per year, barely faster than population growth, meaning that very little progress in material living standards was made. By the 1960’s, it seemed that India may face famine as its galloping population could not be fed by its poorly productive farmers. That fortunately did not happen, as the “Green Revolution” dramatically raised yields of critical crops like wheat and rice, giving many poor nations enough grain to feed their populations. But while India did not starve, it failed to grow much either. By the late 1980’s, India was well behind East Asian nations like South Korea and Taiwan and Malaysia, and it was even substantially poorer than Pakistan, which had far fewer resources and assets when it also became independent in 1947.
The mystery of India’s failed development led to the term “Hindu Rate of Growth”, as a shorthand for India’s tepid and unexpected performance. But India’s failure to develop was not due to Hinduism, it was due to socialism. Nehru and the Congress Party, while committed to secular rule and democracy, was also oddly committed to socialism as an economic policy. While not quite as daft as communism, socialism in India was immensely destructive and acted as an anchor holding back the Indian economy. Instead of developing competitive export industries, India raised massive tariff barriers and focused on “import substitution”. It made this even worse by a whole series of restrictions on economic activity known as the “License Raj”. Without a government license, it was difficult to expand existing businesses or enter into new lines of business. There was a massive bureaucracy that stifled the entire economy, and rules meant to protect workers basically made it impossible to fire anyone, which made companies extremely reluctant to hire.
India’s poor economy culminated in a balance of payments crisis in the early 1990’s, which forced the Indian government to go to the IMF and even to part with some of India’s gold reserves, an act fraught with symbolism of economic disaster in Indian culture. This finally prompted the ruling Congress Party to embrace reform. By this point the Nehru-Gandhi dynasty had petered out, and the Prime Minister was Narasimha Rao, but more important was the Finance Minister Manmohan Singh. He pushed through a series of dramatic reforms that ended the License Raj and opened up India’s economy rather significantly. This led to an acceleration in economic growth to 5-7% per year over the next 20 years, and India saw a significant rise in living standards. New Indian billionaires became players in global corporate games. But Congress lost power to the BJP, a new party that played the Hindu card, declaring loudly its intent to bolster the fortunes of Hindus, and turning its back on the secularism of Congress and Nehru that founded the nation.
While Congress was able to win back power from 2004 to 2014 under Manmohan Singh as Prime Minister, the BJP regained power under Narendra Modi in 2014, who remains firmly in control of India. But while India did grow reasonably rapidly through 2014, the economy has been steadily slowing down under the BJP. Not only has Modi done some rather rash acts, like his overnight banning of high value Rupee notes, he also made a total hash of the COVID pandemic. He managed to combine a devastating pandemic that likely killed 2-3 million Indians (the official statistics are nonsense) with an economic collapse. The economy shrank by 8% last year, and it is struggling to regain that lost ground this year.
But COVID is not what is holding India back under Modi. The far bigger drag is Modi’s focus on what he calls “Hindutva”, which translates badly into English as “Hinduness”. It is a rather amorphous concept, but its core principles include the ideas that being Indian is really about being Hindu, and that promoting Hindus and Hinduism is the primary responsibility of the Indian government. This concept obviously implies that non-Hindus are second-class citizens at best in India. But under Hindutva, being lower caste Hindu is also not a good place to be. The BJP is an upper-caste party. The problem with that from an economic standpoint is the nation will be crippled by the social barriers holding back those who don’t fit into Hindutva. Muslims make up 15% of India, and another 5% belong to other religions. Of the 80% who are Hindu, only about 50% belong to middle and upper-castes. This means that half of India’s population are dramatically restricted from economic and social life. These barriers show up in the bottom line by the falling growth rate of the economy. India has been performing steadily worse for years, even before COVID. It is time to recognize that a new economic curse has struck, the “Hindutva Rate of Growth”.
Even with the reforms of the early 1990’s, India’s performance was not spectacular by any means. Per capita income in China was the same as India in 1990, it is now more than double India’s. While India did catch up to Pakistan in per capita income, the huge income inequality in India (a result of its social system holding back Muslims and lower caste Hindus) meant that poverty was still much worse and more severe in India. Going forward, both Pakistan and Bangladesh have better prospects for the 2020’s than India. Until India creates a level social space for all its citizens regardless of caste or religion, it will be held back.
