India's Foreign Investment Plummets by 43%

**Preface**

In the strategic game between China and the United States, if we were to discuss which country has benefited the most, India, a country that has always been at odds with us, China, would be one of them. However, they have failed to seize the opportunity, and what was once a thriving economy has been reversed into a state of regression by their own actions.

Currently, foreign investment in India is undergoing a massive exodus, with a staggering 43% plummet in volume, which is a stark contrast to their situation in the recent past.

What is unexpected is that while India's economy is in retreat and plummeting, Russia's foreign investment is soaring, and even we, who have been subjected to consecutive sanctions by the United States, remain steadfastly in second place.

What exactly is going on here? Why has India experienced such a reversal of fortunes?

**India's Economic Recession**

India is a nation or region with a multitude of ethnicities and cultures, boasting a population of over 1.4 billion people, making it one of the most populous countries in the world. It is precisely because of their large population that driving economic development has always been a top priority for India.

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Their economy is primarily service-oriented, contributing nearly 55% of their GDP, while agriculture accounts for only 19%. Therefore, India is one of the top three countries in the world in terms of receiving foreign direct investment.

In recent years, the Indian government has relaxed regulations on foreign investment, attracting a significant amount of foreign capital. Moreover, due to the strategic game between China and the United States, the United States has ordered many companies to leave China and establish factories in India.

During this period, India could be said to have gained a significant advantage, with their manufacturing industry developing rapidly, which in turn has stimulated their domestic economy and addressed employment issues.It was unexpected that in 2023, India attracted a total of $28.163 billion in foreign direct investment (FDI), compared to $49.38 billion in the previous year, marking a staggering 43% year-on-year decline.

There are, in fact, discernible patterns to this situation. Firstly, the global slowdown in foreign direct investment, coupled with the COVID-19 pandemic and geopolitical conflicts, has directly impacted the global economic recovery, leading to a noticeable cooling in cross-border investment activities.

Moreover, India's domestic investment climate has significantly deteriorated. Their legal environment and surging nationalist sentiments have caused distress among foreign investors, including Chinese companies, prompting them to consider withdrawing.

Most importantly, India has shown a lack of credibility. The country initially promised benefits to foreign investors, but failed to fulfill these promises once the investors had established their factories, leading to a feeling of being deceived.

As a result, from 2023 to 2024, India's actual utilization of foreign capital reached a seventeen-year low, with a total of $44.4 billion in FDI outflows, a 51% increase compared to the previous fiscal year.

This indicates a significant withdrawal of foreign capital from the Indian market, further exacerbating the decline in foreign investment inflows.

The COVID-19 pandemic in recent years has had a massive impact on the global economy, and India was naturally affected. The pandemic led to nationwide lockdown measures, bringing manufacturing and services to a near standstill, resulting in millions of job losses and a decrease in consumer spending.

In recent years, the Indian government's actions that contravened market rules have led many foreign enterprises to choose to exit the Indian market.

In addition, the surge in U.S. Treasury yields to 5% has caused hedge funds, proprietary funds, and ETFs to reduce their exposure to emerging markets, including India, thereby accelerating the withdrawal of funds.

At the same time, the Indian authorities' sudden announcement to restrict the import of laptops to promote local production has further intensified the withdrawal of foreign capital.【Foreign Capital Withdrawal Heads to Russia】

India is unreliable, China is off-limits, and other countries are either geographically unsuitable or have already been preempted by other foreign investments, leaving these foreign capitals with no choice but to head to Russia.

The Russian government is also aware of this situation and is actively taking measures to attract foreign investment.

The Russian Federation government announced the establishment of three new special economic zones in the Republic of Mordovia, Rostov Oblast, and Tver Oblast, and the expansion of two existing special economic zones in Kaluga Oblast and Lipetsk Oblast to promote economic development and attract foreign capital.

They have even proposed a "modernization strategy," implementing the privatization of state-owned assets, and attracting foreign investment through measures such as amending relevant laws and regulations, simplifying foreign investment procedures, and lowering the threshold for foreign investment entry.

In addition, Russia has established a $10 billion direct investment fund specifically to attract foreign capital and promote economic modernization and the development of key sectors.

Logically speaking, Russia has just experienced war and is being heavily sanctioned by the West, so it should not have the opportunity to attract a large amount of foreign capital.

However, one thing cannot be overlooked: although Russia has gone through war, the saying "even a dead camel is bigger than a horse" applies, as Russia has a significant advantage in both resources and land.

Furthermore, India's deliberate "giving away" behavior has allowed Russia to捡漏 directly......

【China Remains Steady in Second Place】Perhaps some may wonder, with China being sanctioned by Western countries and outmaneuvered by India, has our country's foreign investment plummeted to an unsightly level?

Despite continuous suppression by the United States, and some enterprises relocating their factories from China, China's foreign investment attraction still firmly holds the second position globally.

In 2020, even though global foreign investment decreased by 40%, China's scale of attracting investment grew against the trend by 4%.

China has also implemented a negative list management system for foreign investment access, reducing the areas restricted for foreign investment by 65%, and has attracted foreign investment through a series of policies such as tax cuts and liberalizing general manufacturing industries.

Although some foreign enterprises in the high-tech sector are considering transferring some production lines to Southeast Asia or other regions, overall, China still maintains a strong attraction for foreign investment.

This is mainly due to its vast market, complete industrial chain, and the continuously improving investment environment.

Moreover, from 2017 to 2020, China has maintained its position as the world's second-largest recipient of foreign investment for four consecutive years. In 2020, China's actual use of foreign investment reached 999.98 billion yuan, a year-on-year increase of 6.2%, setting a historical record.

In addition, the proportion of China's absorbed foreign investment in the total global cross-border direct investment increased from 6.7% in 2015 to 15% in 2020.

In the context of a complex and changing global economic situation, China has not only successfully responded to the impact of the COVID-19 pandemic but also achieved a "triple improvement" in the total amount of investment attracted, the growth rate, and the global share.

【Conclusion】Perhaps India aimed to reap the benefits from a conflict akin to the ancient Chinese fable of "the snipe and the clam," where a fisherman profits from their fight. However, they failed to seize the moment and win the hearts of the people, thus turning a situation that was initially very advantageous for them into a complete mess, akin to "a good hand of cards played to pieces"...

Today, China is no longer the country that was bullied by others in the past. Even with the repeated sanctions imposed by the United States, they have been unable to collapse our economy.