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.

Union Minister for Finance & Corporate Affairs Nirmala Sitharaman chairs the eighth Pre-Budget Consultation with the stakeholders and representatives from the trade unions for the Union Budget 2025-26, in New Delhi on January 6, 2025. Photo: X/@FinMinIndia via PTI

Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman, chaired the eighth Pre-Budget Consultation meeting with stakeholders and representatives from trade unions on Monday (January 6, 2025).

The discussion was held in connection with the preparation of the Union Budget 2025-26.The consultations focused on understanding the perspectives of trade unions regarding the upcoming Budget.

This interaction is part of the government’s annual pre-Budget tradition, aimed at gathering inputs from diverse sectors to shape policies and allocate resources effectively.

The Ministry of Finance said in a social media post stated “Union Minister for Finance & Corporate Affairs Smt. @nsitharamanchairs the eighth Pre-Budget Consultation with the stakeholders and representatives from the trade unions in connection with the upcoming Union Budget 2025-26, in New Delhi.”

The meeting witnessed the participation of Union Minister of State for Finance, Pankaj Chaudhary, along with top officials, including the Finance Secretary, Secretaries from the Department of Economic Affairs and Department of Investment and Public Asset Management (DIPAM) and representatives from the Labour Ministry. The Chief Economic Adviser to the Government of India was also present.

The Union Budget 2025-26, expected to be presented in February, is anticipated to address key economic challenges and promote growth.

Earlier Ms. Sitharaman on Thursday (Jan. 2) met stakeholders from the financial sector and capital markets as part of her series pre-Budget consultations.

The Finance Ministry conducts several pre-Budget consultation meetings annually with experts, industry leaders, economists, and state officials. The formal exercise to prepare the annual Budget for the next financial year has already begun.

Ms. Sitharaman has so far held a series of meetings with various stakeholders, including with MSMEs, farmers’ associations, and economists.

Prime Minister Narendra Modi also interacted with a group of eminent economists and thought leaders in preparation for the Union Budget 2025-26 at the NITI Aayog premises last week.

As is the convention, the Budget for 2025-26 will be tabled on February 1, 2025. The 2025-26 Budget will mark Finance Minister Nirmala Sitharaman’s eighth Budget presentation.

All eyes will be on the key announcements and the government’s forward-looking economic guidance for the remainder of the Modi 3.0 tenure.