disappear.group.

With the release of the GDP figures for the third quarter by major global economies, India has once again captured everyone's attention. India's total GDP for the first three quarters exceeded 2.5 trillion US dollars, and particularly, the economic growth rate for the third quarter was as high as 7.5%, surpassing the United States' 2.9%, as well as our country's 3.9%, ranking first among the world's major economies and making it the world's fifth-largest economy.

To be frank, in a year when the global economy is not performing well, the Indian economy is clearly a shining pearl. It's no wonder that India dares to boldly claim that if China is the world's factory, then India is the world's office, and it aspires to become the new world factory.

Let's first take a look at the reasons for India's high economic growth.

India's current economic development model is the same as ours in the early stages. Now, India is also relying on investment, consumption, and exports, these three engines, to achieve a leapfrog development in its domestic economy.

Firstly, in India's third-quarter economic data, investment is the main contributor. According to the data, India's investment growth in the third quarter, after excluding inflation factors, still achieved a high-speed growth of 10.4%. Especially from 2021 to 2022, India's manufacturing industry, in attracting foreign direct investment, achieved a year-on-year growth rate of 76%.

Advertisement

Additionally, since the Russia-Ukraine conflict, India has also extended an olive branch to Russia, importing a large amount of cheap oil and natural gas from Russia, which has become an accelerator for India's economic development.

Furthermore, after obtaining cheap energy from Russia, India turns around to engage in processing trade, and then sells it to the United States and the European Union at relatively higher prices, thus making a fortune.

In other words, India's high-speed economic growth this year is based on a special environment, special background, and the special role India plays in the global economy, which means that India's high economic growth is not sustainable.

We can compare and see: under the influence of rising prices and increasing borrowing costs, India's economic growth in the third quarter has clearly slowed down significantly, much lower than the previous quarter's 13.5%, and has obviously weakened; among them, India's export growth in October experienced a significant decline, with a year-on-year decrease of 16.7%, mainly due to the decline in global demand.

Of course, this is not the main concern. Next, let's take a look together, under the "mirror" of the US dollar, what huge crises are hidden behind India's dazzling data?Firstly, India's manufacturing industry is extremely fragile and at risk of being hollowed out. Although there has been an increase in foreign investment in India's manufacturing sector recently, it is important to note that manufacturing remains a weak link for India and is highly vulnerable. This is because India has transitioned directly from the primary sector to the tertiary sector.

According to data, the proportion of India's manufacturing industry in the gross domestic product (GDP) has decreased from 18.4% in 2018 to 17.8% in 2021. In 2022, this figure is expected to rise to 18.2%, but it is still below India's target of 25%. Therefore, India's current industrial foundation is weak, and becoming the new world's factory is not as simple as just shouting slogans!

Moreover, within the limited manufacturing industry in India, there is also the embarrassment of being hollowed out. Data shows that as of July 2022, 1,777 multinational companies registered in India have left. With a total of only 5,068 registered multinational companies in India, this is equivalent to one-third leaving.

Overseas capital is also packing up and moving away from India, which is known as the third-largest economy in Asia. Data shows that from 2019 to 2021, the proportion of global investment funds flowing into India decreased from 3.4% to 2.8%.

The ultimate reason for foreign companies and capital withdrawing from India is due to India's high tariffs, bridge-demolishing tax investigations, market expansion in India, and the management level of the Indian government. Therefore, this is indeed a slap in the face for India's goal of becoming the new world's factory.

Secondly, India is falling into a population trap. According to United Nations data, India's population reached 1.417 billion people in July this year, only 8 million less than China, and is expected to surpass China next year. However, among such a large population, there are very few people participating in the labor force. Data shows that on average, only 4 out of every 10 people in India are working; additionally, the employment rate of India's female labor force is less than 9%. Many Indians believe that it is better to lie down than to do hard labor.

In addition to young people being lazy and unwilling to work, the quality of India's population is also poor. Currently, there are as many as 270 million illiterates in India. The definition of illiterate here is someone who cannot even write their own name.

Poor work efficiency, few employed people, and low population quality are all causing India to fall into a population trap. If this situation does not change, the more people India has, the worse it will be, because they will only consume resources and not create them. For foreign companies, when work efficiency is low enough, even if the labor force is cheap, the company will still incur losses. This is also one of the reasons for foreign capital to withdraw from the Indian market.Furthermore, India is on the verge of a significant inflationary outbreak. Although India's economic growth rate reached 7.5% in the third quarter, in reality, due to the continuous interest rate hikes by the US dollar, India's inflation for 2022 is already at the stage of a major outbreak, with the actual CPI for the third quarter exceeding 7%. The Indian Rupee has now become one of the worst-performing Asian currencies since the beginning of the year.

This means that a significant factor in India's current GDP data is achieved through monetary injections, inflation, and the devaluation of domestic currency. Therefore, even though the current economic data is so dazzling, it has not brought much improvement to Indian businesses and the general public, and it also埋下 a time bomb for the Indian economy that can be detonated at any time.

In the end, reliance on the US dollar economy has left India heavily indebted. According to World Bank data: due to the continuous interest rate hikes by the US dollar and the devaluation of the Rupee, India's total external debt has now reached 1.4 trillion US dollars. According to data from the Reserve Bank of India: as of November 28, 2022, India's foreign exchange reserves were only 561.16 billion US dollars. This means that India's total external debt is close to breaking through the trillion-dollar mark and falling into a money shortage.

High debt and weak foreign reserves are very fatal for a developing country. This means that even if India's economic data is beautiful, as long as the US economy has a slight mishap, India will fall into the quagmire and cannot extricate itself. As for the US economy, US bank economist Harris stated that a US economic recession could happen at any time!

From the above signs, it is not difficult to see that although India provided a very high GDP growth data in the third quarter, India is facing a series of problems such as high dependence on other countries' orders and the US dollar economy, debt accumulation, and the crazy real estate market. So, behind this data, it can also be said under the "magic mirror" of the US dollar, India is already surging undercurrents and fraught with crises, and the inevitable outcome in the later stage is a mess.

However, the current problems in India have once again sounded the alarm for economies around the world: that is, any economy that is overly dependent on the Western market will not have long-term development! To forge iron, one must be strong oneself. Any country that wants to develop and become strong must get rid of its dependence on the US dollar and accumulate its own strength.

Finally, I also want to ask: ideals are beautiful, but reality is cruel. As India, which wants to become a new world factory, do you still have the confidence to compete with China?