The downward revision of GDP growth projections for the current fiscal year demands bold action to alleviate the growth slowdown and investment stagnation gripping the country, the Congress Party said on Wednesday.
AICC General Secretary in charge of communications, Jairam Ramesh, remarked that this also set a bleak tone for the upcoming Union Budget.
He called for urgent income support for India’s disadvantaged, higher wages under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and a rise in Minimum Support Prices (MSPs), while advocating for a significant overhaul of the "comically complicated" Goods and Services Tax (GST) system, alongside income tax relief for the middle class.
In a statement, Ramesh referred to the government’s advance estimates for GDP growth in the 2024-25 fiscal year, which had been pegged at a mere 6.4%.
"This marks a four-year low, a sharp decline from the 8.2% growth recorded in FY24 (2023-24). It is even lower than the recent RBI projection of 6.6%, which itself had been downgraded from the original forecast of 7.2%. In a matter of weeks, the Indian economy has taken a serious downturn, with the crucial manufacturing sector failing to expand as needed," he said.
The Congress leader argued that the government could no longer deny the reality of India’s economic slowdown and its various facets. He claimed that India’s consumption story had reversed over the last decade, becoming the biggest economic headache.
"According to the data from the second quarter of this year, Private Final Consumption Expenditure (PFCE) growth decelerated to 6% from 7.4% in the preceding quarter. Car sales have slumped to a four-year low. Numerous CEOs from India Inc have raised alarms about the 'shrinking' middle class. Stagnant consumption is not only holding back GDP growth, but it is also why the private sector is reluctant to invest in expanding capacity," Ramesh added.
The Congress leader also highlighted the lack of private investment, pointing to the government’s estimate that the growth rate for Gross Fixed Capital Formation (GFCF), both public and private, would slow to 6.4% this year, down from 9% last year.
He noted that even this figure obscured the true extent of private sector hesitancy in investing. "As acknowledged in the government's own Economic Survey (2024), private sector GFCF in machinery, equipment, and intellectual property products grew by only 35% cumulatively over four years to FY23 (2022-23).
This situation has worsened since then, with new private sector project announcements falling by 21% between FY23 and FY24. The private sector’s unwillingness to invest in new productive capacity will continue to hamper medium-term growth," Ramesh stated.
He further criticised the Union Budget for 2024-25, which had promised an increase in capital expenditure (capex) investment, with a provision of Rs 11.11 lakh crore. However, by November, only Rs 5.13 lakh crore had been spent, which was 12% lower than the previous year, he said.
"Most estimates suggest the government will fail to meet its target by the end of the financial year. The government's own failure to effectively spend allocated funds is partially to blame for the wider economic malaise," he claimed.
Turning to the issue of shrinking household savings, Ramesh cited government data showing that between 2020-2021 and 2022-2023, net financial savings of households had declined by Rs 9 lakh crore. At the same time, household financial liabilities had reached 6.4% of GDP – the highest in decades. "The disastrous policy failures during the COVID-19 pandemic continue to haunt India’s families," he said.
"This presents a grim backdrop for the forthcoming Union Budget for FY25-26 (2025-26). As the Indian National Congress has consistently argued, radical measures are needed to dispel the clouds of economic stagnation and investment paralysis," Ramesh concluded.
"Income support for the poor, higher MGNREGA wages, and an increase in MSPs are essential at this moment. Equally, the GST system must be radically simplified, and income tax relief should be provided to the middle class." The Union Budget will be presented on 1 February 2025.
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