Congress labels Indian economy as 'most precarious in years'

New Delhi: The Indian National Congress raised concerns over what it described as India’s “most precarious and difficult” economic situation in recent years. According to the party, key issues such as stagnant wages, inflation, and rising inequality are severely hampering consumption growth across the nation.

These chokepoints will stifle growth in the coming years if they are not addressed promptly now, Congress general secretary in charge of communications, Jairam Ramesh said in a statement.

Ramesh noted that over the past three decades, India's economic growth has been largely driven by consumption, with millions of families rising out of poverty and joining the middle class, gaining the ability to purchase goods and build assets. This was a hallmark of a thriving economy, one that was growing rapidly and distributing its gains widely, the congress leader said.

Over the past decade, India’s consumption-driven growth has taken a downturn, becoming a major concern for the economy, according to Jairam Ramesh. He noted that industry leaders are echoing these worries, with one prominent CEO even stating that India’s middle class is “shrinking.” Ramesh attributed this slowdown to clear factors: stagnant wages, high inflation, and rising inequality.

Elaborating on these, citing various data sources including official government statistics like the recently released Annual Survey of Industries (ASI) 2022-2023, which provides clear evidence that workers have less purchasing power today than they did 10 years ago.

“Worryingly, these stagnant wages may have to do with a decline in productivity for India’s labourers. As labour productivity falls and real wages stagnate, families will have less additional income to dedicate to consumption,” Ramesh argued.

Regarding high inflation, he pointed out that as noted by Dr. Viral Acharya, former deputy governor of the Reserve Bank of India, the past decade has witnessed the rise of five major conglomerates, including the Adani Group which are establishing monopolies across 40 sectors such as cement, chemicals, petroleum, and construction.

He claimed that in 2015, when an average person spent Rs 100 on goods, only Rs 18 went to the industrialist owner. Today, that same consumer is paying Rs 36 in profits to the same owner. He attributed the price increases of recent years directly to the government's cronyism and its support for these conglomerates.

“This relentless increase in the cost of goods and services has eroded the common man’s ability to increase consumption, especially given stagnant wages,” he added.

Ramesh highlighted that India's recovery from the COVID-19 pandemic has been marked by significant inequality, taking a K-shaped trajectory that has left rural areas and the poorer segments of the population behind.

He noted that sales of two-wheelers in rural regions—a key indicator of economic growth—are still lower than they were in 2018.

He alleged that inequality has reached unprecedented levels, stating, “Data shows that Narendra Modi’s Billionaire Raj is more unequal than the British Raj at its peak.”

Ramesh further pointed out that while the consumption of high-end products, such as premium chocolates, is growing rapidly, mass market consumption is struggling to keep pace due to this unequal growth.

Ramesh stated that without sufficient growth in consumption to guarantee a market for their products, India's private sector will be hesitant to invest in new production.

He referenced the government’s own Economic Survey (2024), which acknowledged that private sector gross fixed capital formation (GFCF) in machinery, equipment, and intellectual property products has increased by only 35 per cent cumulatively over the four years leading up to FY23. “This is not a healthy mix,” he warned, adding that new project announcements by the private sector are set to decline by 21 per cent between FY23 and FY24.

He also asserted that low investment levels hinder medium- and long-term GDP growth rates and contribute significantly to the country's unemployment crisis.

“India is in its most precarious and difficult economic situation in many years. Wage stagnation, inflation, and inequality are not just political issues – they are structurally corrosive to India’s long-term growth prospects,” Ramesh said, these factors undermine India’s consumption growth and deprive the private sector of its most crucial incentive to invest.

“These chokepoints will strangulate growth in the years to come if not taken seriously now, in a spirit of humility,” Ramesh added.

Last week, the Congress party also expressed concerns regarding the country's economic situation, stating that inequality, wage stagnation, and inflation are "structurally corrosive" to India's long-term growth prospects. They urged the government to address issues related to the increasing financialization of the Indian economy.

Ramesh emphasized that boosting the rates of private investment as a percentage of GDP is essential for sustaining higher economic growth. The Congress party has been critical of the government’s economic management, raising alarms about rising unemployment and escalating prices.

(PTI with edits)