top of page

By:

Akhilesh Sinha

25 June 2025 at 2:53:54 pm

Congress tries a ‘third’ hand

New Delhi: The BJP latest manoeuvre in elevating Nitin Nabin as the party’s national working president has had consequences in Maharashtra’s two biggest cities - Mumbai and Pune. The result has left the Congress party in a curiously ambivalent mood: quietly pleased by the opportunities created, yet wary of the turbulence ahead. In Maharashtra, the immediate beneficiary of the BJP’s move is Eknath Shinde’s Shiv Sena. The BJP’s organisational signal has strengthened its hand in the forthcoming...

Congress tries a ‘third’ hand

New Delhi: The BJP latest manoeuvre in elevating Nitin Nabin as the party’s national working president has had consequences in Maharashtra’s two biggest cities - Mumbai and Pune. The result has left the Congress party in a curiously ambivalent mood: quietly pleased by the opportunities created, yet wary of the turbulence ahead. In Maharashtra, the immediate beneficiary of the BJP’s move is Eknath Shinde’s Shiv Sena. The BJP’s organisational signal has strengthened its hand in the forthcoming elections to the BMC, Asia’s richest civic body, and in Pune, the state’s second city. For Shinde, whose legitimacy still rests on a contentious split with the party founded by Bal Thackeray, any reinforcement from the BJP’s formidable machine is welcome. For Uddhav Thackeray, who leads the rival Shiv Sena (UBT), the message is ominous. His party, once the natural custodian of Marathi pride in Mumbai, now faces the prospect of being squeezed between a BJP-backed Sena on one side and a revived Maharashtra Navnirman Sena (MNS) led by his cousin, Raj Thackeray, on the other. Shotgun Alliance That pressure has forced Thackeray into an awkward embrace with his estranged cousin. A reunion of the Thackeray clans, long rumoured and often aborted, has unsettled Thackeray’s MVA ally - the Congress. Signals from the party’s high command suggest a calculated distancing from Shiv Sena (UBT), particularly in Mumbai, where Congress leaders are exploring arrangements with smaller parties rather than committing to a Thackeray-led front. In Pune, the party’s pragmatism is even more pronounced. Quiet efforts are under way to entice Ajit Pawar’s NCP, currently aligned with the BJP, into a tactical understanding for the civic polls. Control of the municipal corporation, even without ideological harmony, is the immediate prize. For the embattled Congress, the civic polls offer a chance to do two things at once. First, by keeping a degree of separation from the Uddhav–Raj combine, it can strengthen its own organisational sinews, which have atrophied after years of playing junior partner. Secondly, it can allow the BJP–Shinde Sena and the Thackeray cousins to polarise the Marathi vote between them, leaving Congress to position itself as a ‘third pole.’ Such a strategy is particularly tempting in Mumbai. A tie-up with outfits like Prakash Ambedkar’s Vanchit Bahujan Aghadi (VBA) could help Congress consolidate minority, Dalit and tribal voters, constituencies it believes are more reliably mobilised without the ideological baggage of Thackeray’s Sena (UBT). Severing or loosening ties with Shiv Sena (UBT) would also simplify Congress’s messaging ahead of assembly elections elsewhere. In states such as West Bengal and Tamil Nadu, where polls loom next year, the party has historically preferred alliances that allow it to emphasise secular credentials and oppose the BJP without accommodating overtly Hindu nationalist partners. Mixed Signals The Congress’ internal signals, however, are mixed. When talk of a Thackeray reunion resurfaced, Maharashtra Congress leader Vijay Wadettiwar publicly welcomed it, arguing that Raj Thackeray’s limited but distinct vote share could help consolidate Marathi sentiment. Mumbai Congress chief Varsha Gaikwad was more circumspect, hinting that alliances with parties prone to street-level militancy deserved scrutiny. Wadettiwar swiftly clarified that decisions would rest with the party’s senior leadership, underscoring the centralised nature of Congress’s calculus. In Pune, meanwhile, senior leaders are reportedly engaged in discreet conversations with Ajit Pawar, whose defection from his uncle Sharad Pawar’s NCP last year still reverberates through state politics. The outline of a broader strategy is becoming visible. Congress appears content to let the BJP and Shinde’s Sena draw on non-Marathi and anti-dynasty voters, the Thackerays appeal to wounded Marathi pride while it quietly rebuilds among minorities and lower-caste groups. Mumbai Approach Mumbai’s demography lends some plausibility to this approach. Alongside its Marathi core, the city hosts millions of migrants from Uttar Pradesh, Bihar and Jharkhand, a constituency that has increasingly gravitated towards the BJP. Raj Thackeray’s strident rhetoric against North Indians, once electorally potent, now risks narrowing his appeal and complicating Uddhav Thackeray’s efforts to broaden his base. None of this guarantees success for Congress. Playing the ‘third pole’ is a delicate art. Yet, the Congress, struggling for survival, has few illusions about sweeping victories. Its aim, for now, is more modest – it is to survive, to remain relevant, and to exploit the cracks opened by its rivals’ rivalries. In Maharashtra’s civic chessboard, that may be advantage enough.

India’s Goldilocks Interlude

Even as global shocks mounted, the first half of FY26 revealed an economy that could still surprise on the upside.

ree

For much of the first half of FY26, the narrative around India’s economy seemed almost wilfully gloomy. Uncertainty over American tariffs, a stalled trade deal with Washington, Western pressure to curtail Russian oil imports, China’s chokehold over rare earths and the ever-present risk of an oil shock from the Iran–Israel conflict combined to darken the global mood. Donald Trump’s jibe that India was a “dead economy” swiftly echoed by Rahul Gandhi, the country’s Leader of Opposition, added a political edge to the pessimism. Yet the data told a different story. Far from wilting under pressure, India absorbed these shocks with surprising ease. H1 FY26 marked not just resilience, but a decisive shift from recovery to acceleration.


Genuine Momentum

The headline numbers were striking. Real GDP growth climbed to 7.8 percent in the first quarter, a five-quarter high, before strengthening further to 8.2 percent in the second, the fastest pace in six quarters. That pushed average growth for the half year to 8.0 percent, well above the 6.1 percent recorded in H1 FY25. Nominal growth was more subdued but steady, averaging 8.8 percent across the two quarters. In absolute terms, real GDP at constant prices rose to Rs 48.63 trillion in Q2, up from Rs 44.94 trillion a year earlier, while nominal GDP reached Rs 86.05 trillion from Rs 78.40 trillion. Four consecutive quarters of accelerating growth suggest that momentum was genuine and broadening.


Unlike earlier spurts driven by a single sector, growth in H1 FY26 was unusually well balanced. Agriculture staged a modest recovery, expanding by 2.9 percent, supported by a strong kharif harvest and healthy rabi sowing. This steadied rural incomes and helped tame food prices. Industry emerged as the standout performer, growing 7.6 percent. Manufacturing, in particular, gathered pace. Construction remained robust, expanding above 7 percent, though mining lagged, contracting in Q1 and stagnating thereafter.


Services, as ever, provided the backbone. Averaging growth of 9.3 percent, they benefited from a familiar mix of digitalisation and demand recovery. Financial, real estate and professional services thrived on digital banking, fintech adoption and IT-enabled exports. Trade, hotels and transport gained from e-commerce growth, a revival in tourism and better infrastructure. Public administration and defence were buoyed by government spending. Together, these sectors ensured that India’s expansion rested on multiple pillars rather than a single prop.


The most important of those pillars was private consumption. Household spending emerged as the primary driver of growth, with private final consumption expenditure rising 7.9 percent in Q2, up from 7.0 percent in Q1 and 6.4 percent a year earlier. Falling inflation lifted real incomes, tax relief boosted disposable earnings, GST rationalisation lowered costs and a series of rate cuts by the Reserve Bank of India reduced borrowing expenses. Rural demand strengthened on the back of higher farm output and employment, even outpacing urban consumption for the first time in several quarters. Rising purchases of consumer durables, travel and hospitality pointed to a shift towards discretionary spending.


Government consumption played a supporting role. Public spending jumped in Q1 on the back of welfare outlays, though fiscal consolidation targets limited its scope thereafter. Investment added further impetus. Gross fixed capital formation grew 7.3 percent in Q2, while government capital expenditure surged by 31 percent year on year to Rs 3.06 lakh crore, underpinning infrastructure creation. More intriguingly, private investment showed tentative signs of revival, accounting for 71 percent of fresh investments compared with 61 percent a year earlier.


Benign Backdrop

All this unfolded against a benign macroeconomic backdrop that policymakers rarely enjoy. Growth surged to multi-quarter highs even as inflation fell to multi-year lows. The compression in headline inflation owed much to food prices. Good monsoons and strong kharif output boosted supply, while falling vegetable and pulse prices weighed heavily on the consumer price index, where food accounts for nearly half the basket. Core inflation stayed contained, aided by spare capacity and subdued demand pressures, despite some firmness in precious metals. Yet this sweet spot is unlikely to last. Food prices remain hostage to the weather, and the RBI expects inflation to rise to 2.9 percent in Q4 FY26 and 4.5 percent in FY27 as base effects fade.


The policy mixes behind the surge were deliberate. Fiscal consolidation was paired with growth-friendly measures such as tax cuts, GST rationalisation and a sharp increase in capital spending. Monetary easing, amounting to a cumulative 100 basis point rate cut, lowered borrowing costs and spurred demand. Strong monsoons, agricultural support, infrastructure investment and labour reforms worked in tandem, delivering a coordinated push rarely achieved in practice.


Externally, India proved more insulated than many expected. Even steep US tariffs imposed in August failed to derail growth. Low export dependence, diversified markets and the resilience of services softened the blow. Demand substitution from South Asia, Southeast Asia and the Middle East helped offset losses while capital inflows continued, reflecting investor faith in India’s reforms and demographics.


Yet beneath the buoyancy lurked fiscal unease. The Economic Survey argues that India needs real growth of 8 percent and nominal growth of 10 percent to achieve its ‘Vikasit Bharat’ ambitions. While the real target was met, nominal growth at 8.8 percent fell short. Tax revenues rose just 4 percent in the first seven months against a 12.5 percent target, forcing reliance on volatile non-tax receipts. Capital spending surged while revenue expenditure was restrained, but the compressed tax-to-GDP ratio underscored a hard truth: strong real growth alone cannot guarantee fiscal stability.


The second half of FY26 will be harder. Tariff effects will bite and global uncertainties will persist. The RBI expects growth to moderate to around 6–6.5 percent. That would still make India the world’s fastest-growing major economy, even if the ‘Goldilocks conditions’ of H1 fade. The challenge now is to turn a fortunate interlude into a durable trajectory.


(The author is a Chartered Accountant with a leading company in Mumbai. Views personal.)

Comments

bottom of page