Breaking Congress Alleges Modi Government’s Policies Fueling Economic Crisis as Inflation Persists

By Hemant Bhatt

NEW DELHI — The Indian National Congress has intensified its criticism of Prime Minister Narendra Modi’s economic policies, accusing his government of steering the country toward a full-blown crisis amid stubbornly high inflation. In a press conference on Tuesday, senior Congress leaders demanded accountability, framing the rising cost of living as a direct consequence of the Bharatiya Janata Party’s (BJP) mismanagement. The allegations come as India faces persistent inflationary pressures, with retail inflation hovering above the Reserve Bank of India’s (RBI) upper tolerance limit for much of 2026, squeezing household budgets and dampening consumer confidence.

What Happened
Congress leaders, including party spokesperson Pawan Khera and former finance minister P. Chidambaram, held a joint press briefing in New Delhi, where they accused the Modi government of failing to curb inflation and mismanaging the economy. Khera stated, “The country is heading toward an economic crisis, and Prime Minister Modi alone must answer for this failure.” Chidambaram, who served as finance minister during the United Progressive Alliance (UPA) government, criticized the BJP’s economic policies, including the 2016 demonetization and the rollout of the Goods and Services Tax (GST), as “ill-conceived” and “disruptive.”

The Congress’s attack follows the release of the latest inflation data by the Ministry of Statistics and Programme Implementation, which showed that the Consumer Price Index (CPI)-based retail inflation stood at 6.3% in June 2026, marginally lower than the 6.5% recorded in May but still above the RBI’s upper tolerance limit of 6%. The RBI has projected that inflation will moderate further in the coming months, citing easing global commodity prices and improved domestic supply chains. However, the central bank has also warned that risks remain, particularly from volatile fuel prices and erratic monsoon patterns affecting agricultural output.

Why It Matters
Inflation has emerged as a critical political and economic issue in India, with its impact felt most acutely by low- and middle-income households. Rising prices of essential commodities—including food, fuel, and housing—have eroded purchasing power, leading to growing public discontent. The Congress’s allegations are likely to resonate in upcoming state elections, where economic performance is expected to be a key battleground. The party has sought to position itself as a credible alternative to the BJP, accusing the ruling party of prioritizing corporate interests over the welfare of ordinary citizens.

For the Modi government, the Congress’s criticism poses a challenge to its narrative of economic resilience. The BJP has consistently highlighted India’s growth trajectory, with GDP expanding at over 7% in 2025-26, as evidence of its effective economic stewardship. However, inflation remains a vulnerability, particularly as global economic uncertainties—including geopolitical tensions and supply chain disruptions—continue to exert upward pressure on prices. The government’s ability to stabilize inflation without stifling growth will be crucial in maintaining public confidence ahead of the 2029 general elections.

Background and Context
India’s inflationary pressures are not new. The country has grappled with price volatility for years, driven by a combination of domestic and global factors. The COVID-19 pandemic exacerbated supply chain disruptions, leading to sharp spikes in food and fuel prices. While inflation eased in 2023 and early 2024, it resurged in late 2025, driven by a confluence of factors, including:

1. Global Commodity Prices: The Russia-Ukraine war and subsequent sanctions disrupted global energy and food markets, pushing up the cost of crude oil, edible oils, and fertilizers. Although prices have moderated since 2024, they remain elevated compared to pre-pandemic levels.
2. Domestic Supply Constraints: Erratic monsoons and agricultural supply bottlenecks have contributed to food price inflation. The RBI’s June 2026 bulletin noted that vegetable prices, particularly for tomatoes and onions, had surged due to unseasonal rains and logistical challenges.
3. Fuel Price Volatility: India’s dependence on imported crude oil makes it vulnerable to global price fluctuations. Despite government efforts to stabilize domestic fuel prices through subsidies and tax cuts, retail fuel inflation has remained a persistent concern.
4. Demand-Side Pressures: Increased government spending on infrastructure and welfare programs, coupled with liquidity measures by the RBI, has fueled demand-side inflation. While these measures have supported economic growth, they have also contributed to price pressures.

The Modi government’s economic policies have been a subject of debate since it came to power in 2014. Key initiatives, such as demonetization in 2016 and the implementation of the GST in 2017, were intended to formalize the economy and boost tax revenues. However, critics argue that these measures caused short-term disruptions, particularly for small businesses and informal workers. The Congress has frequently cited these policies as examples of the BJP’s flawed economic approach, though it has yet to present a detailed alternative economic agenda.

Competing Claims and Uncertainty
The Congress’s allegations of economic mismanagement are not without controversy. While inflation remains a concern, the government has pointed to several mitigating factors:

1. Global Context: Government officials, including Finance Minister Nirmala Sitharaman, have argued that India’s inflation is largely driven by external factors beyond its control. In a recent statement, Sitharaman noted that “global supply chain disruptions and geopolitical tensions have contributed significantly to inflationary pressures worldwide, and India is no exception.” She emphasized that the government has taken steps to cushion the impact on consumers, including reducing taxes on fuel and essential commodities.
2. Economic Growth: The BJP has highlighted India’s robust GDP growth as evidence of its effective economic management. The National Statistical Office (NSO) reported that India’s GDP grew by 7.2% in 2025-26, outpacing most major economies. Government supporters argue that this growth has created jobs and improved living standards, offsetting the impact of inflation.
3. Structural Reforms: The Modi government has defended its economic policies, including the GST and the Production-Linked Incentive (PLI) scheme, as long-term measures to boost manufacturing and formalize the economy. Officials argue that these reforms will yield dividends in the form of higher productivity and lower inflation over time.

Economists remain divided on the root causes of India’s inflation. Some, like former RBI governor Raghuram Rajan, have argued that structural issues—such as agricultural supply constraints and fuel price volatility—are the primary drivers. Others, including government advisors, contend that demand-side factors, such as increased government spending, have played a more significant role. The lack of consensus underscores the complexity of India’s inflation challenge and the difficulty in crafting effective policy responses.

What to Watch Next
As India heads into a busy election season, with key state polls scheduled for later this year, the economic debate is likely to intensify. Several factors will shape the narrative in the coming months:

1. Inflation Trajectory: The RBI’s monetary policy decisions will be closely watched. The central bank has signaled its commitment to bringing inflation within its target range of 2-6%, but the pace of rate cuts will depend on global and domestic economic conditions. If inflation remains stubbornly high, the RBI may delay further rate reductions, which could dampen economic growth.
2. Government Response: The Modi government’s ability to address inflation without compromising growth will be critical. Measures such as targeted subsidies, fuel tax cuts, and agricultural reforms could help stabilize prices, but their effectiveness remains uncertain. The government’s fiscal policy, including its budget for 2027-28, will also be scrutinized for its inflationary impact.
3. Opposition Strategy: The Congress’s ability to present a coherent economic alternative will determine its credibility as a challenger to the BJP. While the party has criticized the government’s policies, it has yet to outline a detailed plan to tackle inflation and unemployment. If the Congress fails to articulate a clear vision, its attacks on the BJP may ring hollow with voters.
4. Global Economic Trends: External factors, such as global commodity prices and geopolitical developments, will continue to influence India’s inflation outlook. A resurgence in oil prices or a fresh wave of supply chain disruptions could derail the RBI’s projections and reignite inflationary pressures.
5. Public Sentiment: Inflation’s impact on household budgets will be a key determinant of voter behavior in the upcoming state elections. If price rises continue to outpace wage growth, public discontent could translate into electoral losses for the BJP. Conversely, if inflation moderates as projected, the government may be able to claim credit for stabilizing the economy.

Conclusion
The Congress’s accusation that the Modi government’s policies are pushing India toward an economic crisis reflects a broader political battle over economic stewardship. While inflation remains a pressing concern, the debate is as much about perception as it is about policy. The BJP’s narrative of economic resilience and growth contrasts sharply with the Congress’s portrayal of mismanagement and failure. As India navigates a complex economic landscape, the ability of both parties to address voter concerns—particularly on inflation and jobs—will shape the political discourse in the lead-up to the 2029 general elections.

For now, the economic data presents a mixed picture. Inflation is high but moderating, growth is robust but uneven, and global uncertainties loom large. The challenge for the Modi government is to balance these competing priorities while maintaining public confidence. For the Congress, the task is to move beyond criticism and offer a credible alternative. As the political rhetoric heats up, the real test will be whether either party can deliver tangible solutions to India’s economic challenges.

Story synopsis gathered from: [The Hindu](https://www.thehindu.com/news/national/country-heading-towards-economic-crisis-due-to-modi-governments-policies-congress/article71224580.ece) — source.

Story synopsis gathered from: The Hindu – National — source.