New Era of Enriching Hindu Growth Rate

Summary

Sunil S. Bhandare’s booklet, published by the Forum of Free Enterprise in March 2010 and adapted from an article in MEDC’s Monthly Economic Digest, charts India’s exit from the so-called “Hindu growth rate” of roughly 3.5% per year that prevailed across the first four decades of planning (1950-89), through the “neo-Hindu” rate of 5.5% in the 1990s, to what he names a third phase: an “Enriching Hindu Growth” (EHG) decade in which real GDP averaged above 7% from 2000-01 to 2009-10, peaking at a historic 8.5%. He frames this as a benchmark-setting consolidation of the post-1991 reform process — “an irreversible process of economic reforms” — and as the moment India is being recognised as a formidable emerging economic power.

Bhandare anatomises six features of the EHG phase: acceleration in the doubling of per capita real income (now about twelve years, versus nineteen during the planning era); a sharp structural shift into services (which rose from 48.5% of GDP in 1989-90 to 65.7% in 2009-10 while agriculture collapsed from 31.8% to 15.5% even though it still employs 55% of the labour force); new manufacturing drivers in automobiles, telecom, pharmaceuticals and biotechnology, with autos crossing 11 million units; the IT/BPO industry’s transformational role in services exports and skilled employment; sharply shifting private consumption patterns (food’s share of PFCE falling from 48.2% to 42.3%, with comforts, communications and entertainment rising); and a visibly changing income pyramid as middle- and upper-class households expand. Each claim is supported with CSO, RBI Handbook of Statistics, NCAER and World Development Report data.

The argument is decidedly not triumphalist. Quoting Chief Economic Adviser Kaushik Basu on India’s 10% potential and the need for the bureaucracy to “pull up its socks,” Bhandare flags that India still ranks 83rd of 133 countries on per capita PPP GNI ($2,960), trails China badly in industrial capacity (steel: 660 vs 60 mn tonnes; cement: ~1400 vs ~200 mn tonnes), and faces food inflation hovering at 18% with persistent agricultural-productivity stagnation. He calls for a “Second Green Revolution” through land-holding consolidation, contract and corporate farming, post-harvest infrastructure and rural connectivity; restoration of fiscal discipline under FRBM toward a 40% investment-and-savings ratio; and substantial state-led thrust on power and transport infrastructure, since “the most important component is the power sector.”

The closing register is liberal-optimist: India needs “more positive, proactive investment-friendly policy; and more importantly, a high pedestal of governance, good governance and better and better governance” to deliver sustainable and inclusive growth in the coming decade. The booklet closes with a biographical tribute to Shailesh Kapadia (1949-1988), a Chartered Accountant, FFE associate and Vice-Chairman of the Indian Merchants’ Chamber’s Direct Taxation Committee, whose memorial trust sponsored the publication.

Key points

• Bhandare proposes naming the 2000-2010 decade the “Enriching Hindu Growth” (EHG) rate phase, with average real GDP growth above 7% peaking at 8.5%, succeeding the “Hindu” (3.5%, 1950-89) and “neo-Hindu” (5.5%, 1990-2000) phases.

• Per capita real GDP now doubles in about twelve years, compared with nineteen during the earlier planning era — the headline marker of the EHG phase.

• Sectoral shares of GDP shifted dramatically: services from 48.5% to 65.7%, agriculture from 31.8% to 15.5%, industry roughly flat — even though agriculture still employs 55% of the labour force.

• India ranks 12th globally on GNI at market exchange rates and 4th in PPP terms, but per capita PPP GNI ($2,960) still places it 83rd of 133 countries, well behind China.

• Manufacturing has new drivers in autos (11 mn units crossed in 2009-10), telecom, pharma and biotech, while IT/BPO has built world-class capability and over 8 mn direct and indirect jobs.

• Private consumption is rebalancing away from food (PFCE share down from 48.2% to 42.3%) toward comforts, services and a fast-growing organised retail format.

• Major constraints flagged: low agricultural productivity, food inflation around 18%, inadequate physical infrastructure (especially power) and the unresolved poverty/inequality debate around the Tendulkar Committee’s revised estimates.

• The prescription is liberal-reformist: fiscal consolidation back toward FRBM discipline, a 40% investment-and-savings ratio, a “Second Green Revolution” via consolidated land-holdings and corporate farming, and above all “a high pedestal of governance” for sustained, inclusive growth.