New Delhi, Mar 6: The Congress highlighted the “tepid” growth of private investments in India, referencing a report from the International Monetary Fund (IMF) on Thursday. They asserted that to overcome the current “economic slump,” it is essential to boost consumption, enhance policy predictability, and simplify trade policies.
Jairam Ramesh, Congress general secretary in charge of communications, pointed out that the IMF’s latest annual Article IV Consultation Report on India contains a dedicated section titled “Reigniting Private Investment in India.”
“Notably, this report implicitly critiques the policies and actions of the Modi government,” he stated.
“The report emphasizes the sluggish growth in private investment, indicating that ‘private corporate investment has remained low, especially when compared to historical averages.’ Alarmingly, this trend is worsening, with ‘nominal investment growth by private corporates declining from 21 percent in 2022/23 to 13 percent in 2023/24,’” Ramesh added.
Our statement regarding the IMF’s recently-released report on revitalizing private investment in India. The IMF’s findings support the INC’s ongoing calls for actions that stimulate consumption, improve policy predictability, and refine trade policy pic.twitter.com/ojgSLfppOM
— Jairam Ramesh (@Jairam_Ramesh) March 6, 2025
Ramesh specifically noted that investment in machinery and equipment, which is crucial for expanding production capacity, has consistently diminished as a percentage of GDP.
The IMF further highlights that manufacturing capacity utilization only reached 75.8 percent during July-September 2024, with most companies expecting their production capacity to be sufficient to meet demand within the next six months, he stated.
This reduction in manufacturing production expectations mirrors the broader slowdown in consumption growth, according to Ramesh.
“When consumers have less disposable income, their demand for goods and services declines. Therefore, manufacturing firms cannot fully utilize their existing production capacity, leaving them with little incentive to invest in growth,” he argued.
Ramesh noted that the IMF indicated India’s Foreign Direct Investment has fallen short of expectations in recent years, with India’s share of global FDI dropping from about six-and-a-half percent in 2020 to approximately 2 percent in 2023.
This decline is attributed in part to the incoherent trade policy of the Modi Government, which is characterized by an open-door approach for China while imposing restrictions on other nations, he claimed.
“This has resulted in India experiencing the worst of both scenarios, where investors are hesitant to produce for export markets due to fears of retaliatory protectionism and unwilling to invest for domestic consumption because of potential Chinese dumping,” Ramesh argued.
Moreover, the IMF suggests that the observed rise in labor force participation rates can be largely attributed to self-employment and unpaid family work, Ramesh noted.
As highlighted by the Congress, this indicates a troubling decline in the quality of jobs available in recent years, he added.
He pointed out that the IMF also observes concerning trends, such as an increase in agricultural employment that diverges from the usual path of labor moving towards industrial and service sectors.
“This economic distress stems directly from the policies of the Modi government, including demonetization and the poorly implemented GST, which urgently requires reform,” Ramesh said.
The IMF report clearly illustrates that a significant challenge in reviving India’s private investment lies in addressing the disparity between government claims and economic realities, he added.
“The neglect of fundamental issues combined with a focus on a select group of politically-connected monopolists has resulted in this failure,” he asserted.
Ramesh emphasized that the Congress party has consistently maintained that the solution to India’s current economic predicament is threefold.
He advocated for initiatives to invigorate mass consumption and stimulate real wage growth, which has been stagnant for a decade.
Additionally, the Congress has called for a clearer economic policy environment, characterized by fewer abrupt policy shifts, an end to taxation pressures, and a diversion from the “Most Favored Businessmen” policy of the past decade, he stated.
Furthermore, Ramesh urged for a reevaluation of trade policy to enhance protection against the dumping of Chinese industrial overcapacity and to foster integration into global value chains, particularly in labor-intensive manufacturing.
The Congress has been critical of the government’s economic management, asserting that issues such as rising prices, declining private investment, and stagnant wages are adversely affecting the general populace.
Highlighting challenges related to low consumption and inequality, the Congress previously stated that the resolution to this crisis lies in shifting the focus of policy formulation from cronyism to grassroots empowerment, starting with a boost to rural incomes. (AGENCIES)
