Fri Feb 21 03:00:00 UTC 2025: ## India’s Stagnant Growth: Consumption-Driven Economy Needs Investment Boost, Expert Warns

**NEW DELHI, February 21, 2025** – India’s economic growth, heavily reliant on consumption, is lagging behind, according to a new analysis by Professor Jayan Jose Thomas of IIT Delhi. While consumption contributes a significant 60.3% to India’s GDP, this model is proving less effective than investment-led growth, and exacerbating inequality.

Professor Thomas argues that India’s economic performance is hampered by insufficient investment, both public and private. He highlights the stark contrast with China, where higher investment rates have fueled significantly faster economic growth. Since the early 1990s, China’s per capita income has surged to five times that of India’s. This difference, the professor notes, is directly linked to China’s consistently higher investment rates in infrastructure, manufacturing, and technology, even during economic downturns.

In contrast, India’s investment rate has remained low, particularly since 2012, with only household investment in residential buildings showing some resilience. This lack of investment, Professor Thomas suggests, reflects a lack of “animal spirits” among private capitalists. He criticizes the government’s recent budget for failing to address this crucial issue, opting instead for tax concessions rather than substantial increases in public spending. This approach, he warns, perpetuates a low-growth trajectory benefiting primarily the middle and upper classes.

The analysis emphasizes the “multiplier effect” of investment, where initial investment generates further economic activity and boosts overall GDP significantly more than the initial outlay. This effect is much weaker with consumption-driven growth, leading to slower overall economic expansion and widening income disparities.

Professor Thomas concludes that a significant government investment push, particularly in critical sectors, is vital to stimulate private sector confidence and ensure more equitable growth across all segments of Indian society. The current reliance on consumption, he warns, is not sustainable and leaves a large portion of the population behind.

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