Congress suggests relief in income tax for the middle class, MSP for farmers, and income support for the poor in upcoming Union budget

 Congress leader Jairam Ramesh. File.
| Photo Credit: Shashi Shekhar Kashyap

The downward revision of Gross Domestic Product (GDP) growth estimates for the current fiscal provides a gloomy backdrop to the upcoming Union budget, and needs radical action to dispel “the cloud of growth slowdown and investment chill” in the country, the Congress said on Wednesday (January 8, 2025).

Congress general secretary (communications) Jairam Ramesh in a statement said there should be income support for India’s poor, higher Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) wages, and increased Minimum Support Prices (MSPs).

Drastic simplification of the “comically complex” Goods and Services Tax (GST) regime, and Income Tax relief for the middle class, were also the need of the hour, the party said.

“The advance estimates released by the Union government for GDP growth in FY 25 year project a mere 6.4 per cent growth. This is a four-year low, and a sharp deceleration compared to the 8.2 per cent growth recorded in FY24 (2023-24). It is even lower than the recent RBI [Reserve Bank of India] estimate of 6.6 per cent growth which itself marked a reduction from the earlier projection of 7.2 per cent,” Mr. Ramesh said, adding, “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.”

Asserting that the government could no longer deny the reality of India’s growth slowdown, the Congress leader alleged that India’s consumption story was the biggest pain point, as it has gone into “reverse swing” in the past 10 years.

“In the data from Q2 [second quarter] of this year, Private Final Consumption Expenditure (PFCE) growth slowed to 6 per cent from 7.4 per cent in the previous quarter. Car sales have plunged to a four-year low. 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,” Mr. Ramesh said.

He also pointed to sluggish private investment, saying the government’s projection for growth in Gross Fixed Capital Formation (public and private) was that it would slow to 6.4% this year, down from 9% last year.

Mr. Ramesh said the Union budget for 2024-25 had made grand promises on increase in capex investment, with an allocation of ₹11.11 lakh crore, but until November 2024, only ₹5.13 lakh crore had been spent. “Most estimates suggest that the government will fail to meet the target before the end of the financial year. The government’s own incompetence in spending its funds is partly responsible for the wider economic gloom,” he said.

Mr. Ramesh said data from the Union government itself showed that between 2020-2021 and 2022-2023 net financial savings of households fell by ₹9 lakh crore, pointing to a shrinkage in net household savings.

“This is the gloomy backdrop to the upcoming Union Budget for FY25-26 (2025-26). As the Indian National Congress has consistently advocated, radical action is necessary to dispel these clouds of growth slowdown and investment chill. Income support for India’s poor, higher MGNREGA wages, and increased MSPs are the need of the hour, as is a drastic simplification of the comically complex GST regime and income tax relief for the middle classes,” Mr. Ramesh said.