Congress alleges govt ‘panic mode’ over economy, questions reported FPI tax rollback plan

Congress on Thursday claimed that the Narendra Modi government was in “panic mode” over the state of the economy and accused it of resorting to short-term measures instead of addressing deeper structural issues affecting private investment and growth.

In a statement, Congress general secretary in charge of communications, Jairam Ramesh, referred to media reports suggesting that the Centre was considering an ordinance to amend the Income Tax Act and remove the 12.5 per cent long-term capital gains tax on investments made by foreign portfolio investors (FPIs) in Indian government securities.

“The Modi Govt is clearly in panic mode and is under siege from within its ecosystem on the current economic situation,” Ramesh said.

Citing a television news report, he claimed that the government was planning to promulgate an ordinance to completely eliminate the tax on long-term capital gains earned by FPIs from investments in Indian government securities. The 12.5 per cent rate had been fixed in the union Budget presented in July 2024, he noted.

The Congress leader argued that such a move, if implemented, would not address what he described as the core challenge facing the economy — weak private corporate investment. According to him, despite corporate earnings reaching record highs, domestic private investment has remained subdued, with the rate of private corporate investment as a percentage of GDP witnessing a noticeable decline.

“The real problem is that private corporate investment is very tepid within India. Those who can and must invest in India are either investing abroad or postponing investments at home,” Ramesh said.

He contended that temporary policy interventions would not be enough to revive investment sentiment and economic momentum. “Band-aid ordinances may provide headlines but are no substitute for addressing the structural causes of depressed rates of private corporate investment,” he said.

Ramesh listed what he called the underlying factors weighing on investment activity, including stagnation in real wages, rising income and wealth inequalities, increasing concentration of economic power across sectors and an atmosphere of uncertainty created by the alleged misuse of investigative agencies.

He also criticised the government’s trade and industrial policies, claiming that growing imports from China had further aggravated challenges faced by domestic industry and investment.

The remarks come amid an ongoing debate over measures needed to boost economic growth, attract capital and stimulate private sector investment. While the government has consistently highlighted strong macroeconomic indicators and infrastructure spending as drivers of growth, opposition parties have argued that investment and consumption demand continue to face structural constraints that require broader policy interventions.