6.5% growth rate means India stuck in lower-middle income trap: Chidambaram

Senior Congress leader P Chidambaram on Sunday asserted that the growth rate of 6.5 per cent was not a moment of celebration, but it was telling of India being stuck in the lower-middle income trap without the "ideas or intrepidity" to get around.

"A growth rate of 6.5 per cent is not a moment of celebration. It means that India is stuck in the lower-middle income trap without the ideas or the intrepidity to break out. It is a time for summoning Manmohan Singh-like courage," Chidambaram posted on X.

He further said that India's Gross National Income (GNI) per capita of $2,650 needs to double for it to get around the low-middle income group.

Citing excerpts from his column in an English daily, Chidambaram argued that India remains in the group of countries with a 'lower-middle income' because of its average growth rate of 6.5 per cent a year over several years, which he said was "dismal".

"I think an average growth rate of 6.5 per cent a year over several years is dismal. That rate keeps India in the group of countries with a 'lower-middle income'. India's GNI per capita of $2650 (in 2024) needs to double to get India out of the lower-middle income group. If India's current rate of growth is sustained, it will take nine years to achieve that goal," the former Union Home Minister posted on X.

Chidambaram said that the Gross Fixed Capital Formation (GFCF) was 35.8 per cent of the Gross Domestic Product (GDP) in 2007-08, but it has fallen to 300.1 per cent of GDP in 2024-25.

"Private Fixed Capital Formation (PFCF) -- part of the total GFCF -- has fallen from 27.5 per cent of GDP IN 2007-08 to 23.8 per cent in 2022-23 (last available official data)," the Congress leader said.

Speaking about private capital "shying away from India", Chidambaram argued that it was because of a trust deficit between the government and the industry. He added that the unemployment rate for the 'educated unemployed' is 29.1 per cent since there are no jobs for this group.

"Why is private capital shying away from India. The foremost reason is the trust deficit between the government of India and the industry. There are no jobs for the 'educated unemployed', and the unemployment rate for this group is 29.1 per cent. 'Youth unemployment' rate is 45.4 per cent," he said.