India in its most precarious, difficult economic situation in many years: Congress slams govt

Asserting that India is in its “most precarious and difficult” economic situation in many years, the Congress on Wednesday (October 30, 2024) said wage stagnation, inflation and inequality are undermining consumption growth in the country.

These chokepoints will strangulate growth in the years to come if not taken seriously now, Congress general secretary in-charge communications Jairam Ramesh said in a statement.

Also read | Bombastic claims on economy conceal choke points that will strangulate growth: Jairam Ramesh

He said that for the past three decades, the India growth story was one of consumption growth – the story of crores of families escaping poverty and entering the middle class, newly able to afford products and acquire assets.

It was the sign of a thriving economy, one that was growing rapidly and distributing its gains widely, the Congress leader said.

In the last 10 years, India’s consumption story has now gone in reverse swing and emerged as the biggest pain point for the Indian economy. India Inc. has now joined the chorus, with a leading CEO even going so far as to say that the middle class in India is “shrinking”, he said.

Mr. Ramesh said the reasons for this slowdown are clear – stagnant wages, high inflation and inequality.

Elaborating on these, he said multiple data sources, including the government’s own official statistics such as the recently released Annual Survey of Industries (ASI) 2022-2023, have shown clear evidence that workers can buy less today than they could 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,” the senior Congress leader argued.

On high inflation, Mr. Ramesh said that as Dr Viral Acharya, former deputy governor of the Reserve Bank of India, has noted, the last decade has seen the emergence of five big conglomerates, including the Adani Group, who are building monopolies in 40 sectors, including cement, chemicals, petrol and construction.

In 2015, when a common man used to purchase ₹100 worth of goods, he was paying 18% to the industrialist owner but today, he is now paying ₹36 in profits to the same owner, he claimed.

The price rise of the last few years is directly attributable to the government’s cronyism and patronage of these conglomerates, Mr. Ramesh alleged.

“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.

On equality, Mr. Ramesh said that India’s recovery from the COVID-19 pandemic has been highly unequal and K-shaped, with rural India and the poor left behind.

The sales of two-wheelers in the rural areas, a leading indicator of economic growth, are still lower than they were in 2018, he said.

“Across geographies, inequality has peaked, with data showing that Narendra Modi’s Billionnaire Raj is more unequal than the British Raj in its heyday,” Mr. Ramesh alleged.

Consumption of high-end products such as premium chocolates is growing rapidly, but because of unequal growth, mass market consumption is unable to keep pace, he pointed out.

Without adequate growth in consumption to assure them of a market for their products, India’s private sector will be unwilling to invest in new production, Mr. Ramesh said.

“As the Government’s own Economic Survey (2024) acknowledged, private sector GFCF in machinery and equipment and intellectual property products has grown cumulatively by only 35 per cent in the four years to FY23… This is not a healthy mix. It is about to get worse, with new project announcements by the private sector falling by 21 per cent between FY23 and FY24,” the Congress leader said.

Low investment levels drag down the medium and long-term GDP growth rates and are responsible for the country’s unemployment crisis, he claimed.

“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,” Mr. Ramesh asserted.

They undermine India’s consumption growth and deprive the private sector of its single most important incentive to invest, he added.

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