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Informist, Wednesday, Jan. 8, 2025

 

NEW DELHI – Expressing concerns over GDP growth first advance estimates for the current financial year ending March, the Congress party on Wednesday advocated for radical action to dispel the "clouds of growth slowdown and investment chill". "In a few short weeks, the bottom has fallen out of the Indian economy, with the all-important manufacturing sector simply refusing to expand as it should. The government can no longer deny the reality of India's growth slowdown and its various dimensions," the Congress party said in a statement released Wednesday.

 

According to the first advance estimate released by the statistics ministry on Tuesday, the country's GDP growth is estimated to moderate to a four-year low of 6.4% in 2024-25 (Apr-Mar). The Indian economy has grown by at least 7% in each of the last three financial years after shrinking 5.8% in the pandemic-hit FY21. In FY24, GDP growth beat all forecasts to come in at 8.2%.

 

Congress General Secretary Jairam Ramesh, in the statement, advocated for income support for the poor, income tax relief for the middle class, and ensuring higher wages under the Mahatma Gandhi National Rural Employment Guarantee scheme. "Income support for India's poor, higher wages under Mahatma Gandhi National Rural Employment Guarantee scheme, and increased minimum support price are the need of the hour, as is a drastic simplification of the comically complex GST (Goods and Services Tax) regime and income tax relief for the middle classes," Ramesh said.

 

The Congress said that the stagnation in mass consumption, sluggish private investment, low capital expenditure by the government, and shrinking household savings are the primary causes behind the GDP growth slowdown. "In the last ten years, India's consumption story has gone into reverse swing and emerged as the biggest pain point for the Indian economy. In the data from Q2 (Jul-Sept) of this year, Private Final Consumption Expenditure growth slowed to 6% from 7.4% in the previous quarter. Car sales have plunged to a four-year low," Ramesh said. "Several CEOs from India Inc have themselves raised the alarm over the 'shrinking' middle class. Stagnant consumption is not just dragging GDP growth rates directly, it is also the reason why the private sector is disinclined to invest in capacity addition." 

 

The Congress leader said the government's projection of growth in gross fixed capital formation (public and private) covers up the true extent of the private sector's reluctance to invest in the country. "As the government's own Economic Survey (2024) acknowledged, private sector GFCF (gross fixed capital formation) in machinery and equipment and intellectual property products has grown cumulatively by only 35% in the four years to FY23... This is not a healthy mix. It has only become worse since, with new project announcements by the private sector falling by 21?tween FY23 and FY24. The private sector's reluctance to invest in the addition of new productive capacity means that our medium-term growth will continue to suffer," Ramesh said.

 

The Congress also asserted that the government's incompetence in spending its funds is partly responsible for the wider economic gloom. "The Union Budget for FY25 made grand promises about the increase in capex investment, with an allocation of INR 11.11 trillion. Till November, only INR 5.13 trillion has been spent – 12% lower than last year. Most estimates suggest that the government will fail to meet the target before the end of the financial year," he said.   End

 

Reported by Kuldeep Singh

Edited by Tanima Banerjee

 

 

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