Chidambaram calls 6.5% growth ‘dismal’, cites trust deficit and weak investment climate

Former finance minister P. Chidambaram has warned that India’s current pace of economic growth risks trapping the country in a lower-middle income bracket for years unless bold reforms are undertaken to revive private investment and job creation.

In his latest column published in The Indian Express on October 19, 2025, Chidambaram described India’s average annual growth rate of 6.5 per cent as “dismal”, arguing that it fails to generate the momentum required to elevate the nation’s income status.

“That rate keeps India in the group of countries with a lower-middle income,” he noted, pointing out that India’s Gross National Income (GNI) per capita stood at USD 2,650 in 2024.

At the existing growth trajectory, he estimated, it would take nine years for India to double its GNI per capita and move beyond the lower-middle income category, a pace he deemed far too slow for an aspiring global power.

Chidambaram drew attention to the sharp decline in investment ratios that underpin long-term growth.

Gross Fixed Capital Formation (GFCF) has dropped from 35.8 per cent of GDP in 2007-08 to 30.1 per cent in 2024-25, while Private Fixed Capital Formation (PFCF), the segment most vital for job creation, has fallen from 27.5 per cent of GDP in 2007-08 to 23.8 per cent in 2022-23, according to the latest available data.

He attributed the slide in private investment to a growing “trust deficit” between industry and the government, which, he argued, has deterred businesses from committing new capital.

“The foremost reason is the trust deficit between the government of India and the industry,” he wrote, underscoring the need to rebuild confidence through credible policy measures.

The former minister also highlighted the alarming unemployment figures, particularly among the educated and the youth. He cited data showing an unemployment rate of 29.1 per cent among educated individuals and 45.4 per cent among young jobseekers, figures that he said reflected the economy’s inability to generate adequate employment opportunities.

Chidambaram concluded that a 6.5 per cent growth rate should not be a cause for celebration but rather a wake-up call.

He described the economy as “stuck in the lower-middle income trap” and urged policymakers to display the kind of resolve and vision associated with former Prime Minister Manmohan Singh’s reform era.

“It is a time for summoning Manmohan Singh-like courage,” he wrote, calling for decisive policy action to restore investor trust, accelerate private capital formation, and unlock India’s potential for sustained, inclusive growth.