In recent years, India's economic development has been very rapid, with its GDP growth rate even surpassing that of China. There are even reports suggesting that in another two or three years, India will surpass Germany and Japan to become the world's third-largest economy. Indian Prime Minister Modi has even put forward the slogan that "India will become a developed country" by 2047.

In this context, many people are full of expectations for India's economy. However, unexpectedly, India's foreign investment has suddenly plummeted by 43%, with foreign capital choosing to withdraw their investments en masse.

At the same time, Russia's economy has unexpectedly risen, and China remains "as stable as Mount Tai." So, what exactly is going on? Why is India's economy experiencing a recession?

Plummet in India's Foreign Investment

During the tenure of Trump and Biden, sanctions were imposed on China, and India, as China's neighbor, became a beneficiary of the Sino-American rivalry. Due to its unique geographical location and border conflicts with China, the United States has been "very attentive" to India. Since the escalation of Sino-American competition, the U.S. has begun to vigorously support India, continuously driving the development of India's economy and stock market.

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However, last year, foreign investment flowing into India experienced a sharp decline. According to the Economic and Commercial Office of the Chinese Consulate General in Mumbai, on June 21st, it was reported:

Indian media reported on June 21st that the United Nations Conference on Trade and Development released a report on June 20th, local time, showing that against the backdrop of a 2% global decline in foreign direct investment (FDI) in 2023, foreign direct investment flowing into India plummeted by 43%, to just $28 billion. This has caused its ranking to slip from the eighth position in 2022 to the fifteenth position in 2023.Not only that, but many companies that have already invested in India are choosing to withdraw.

In response, the Indian Investment Bureau also plans to attract $110 billion in foreign direct investment annually over the next seven years, thereby promoting domestic economic growth. However, since 2022, the amount of foreign investment attracted by India has shown a downward trend.

Indian Prime Minister Modi has always emphasized the revitalization of domestic manufacturing. In recent years, India has attracted a large amount of foreign investment, and many foreign companies have entered India, mainly due to the low cost of labor in India.

For example, Foxconn, but due to India's incomplete industrial chain, low logistics efficiency, and low level of workers' education, the quality of the mobile phones produced is very poor. These factors combined will lead to higher actual costs.

In addition, American companies such as Ford, Amazon, and Walmart have suffered a lot after investing in India, so these factors have made India known as the "graveyard of foreign capital."

In the past 7 years, 2783 foreign companies have closed their businesses in India. Alwyn Subramanian, a senior economic advisor to the Indian government, said in March this year that although the Indian government has been claiming in recent years that India has a very good investment environment, the reality is that foreign investment is continuously declining.

It was previously reported that Xiaomi was fined 500 million yuan by Indian authorities and had 4.85 billion yuan of assets frozen. These examples have led many companies to be afraid to invest in India.

India has a large population and a huge market, and is expected to be able to take over China's manufacturing capacity, and has been highly expected by Europe and America. However, even with unique advantages, India's behavior of trapping foreign capital has also made foreign capital step by step away from India.

Russian economic growth

According to data from the Russian Statistics Bureau, Russia's gross domestic product grew by 5.4% year-on-year in the first quarter of this year. The latest statistical data from the International Monetary Fund (IMF) and the World Bank show that, calculated in US dollars, Russia has entered the top ten list of the fastest growing economies in the world in the 21st century, and has grown by seven times since the beginning of this century.Under the various sanctions imposed by the Western countries against Russia, it is indeed unexpected that Russia's economy has not only withstood the pressure but has also shown growth, and this is largely due to their legal arsenal.

Since the outbreak of the Russo-Ukrainian war, the Western countries have imposed an unprecedented number of sanctions on Russia, including a wide range of export restrictions on energy, trade, and commerce. After Russia was subjected to these sanctions, its financial markets became a primary target for attack.

Not only were Russia's foreign exchange reserves frozen, but Russia was also barred from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Despite these circumstances, Russia has managed to maintain the stability of its economy.

Russia has also attracted foreign investment. As the global trade and economic landscape changes, seeking new economic growth points has become a top priority for businesses, and Russia is actively calling for and attracting foreign capital.

In December last year, the Russian Foreign Trade Bank held the 14th "Russia Calling!" forum at the Moscow International Trade Center. The main participants of this forum were investors from China, India, Turkey, the Middle East, Africa, Central Asia, and Southeast Asia.

Many countries, including China, expressed their willingness to cooperate with Russia. After many Western companies left Russia, a significant market space was vacated, which is gradually being filled by Chinese enterprises.

The Russian government also offers preferential policies for foreign small and medium-sized enterprises (SMEs). For example, Chinese foreign-funded enterprises are included in the unified register of Russian SMEs and can enjoy tax policies in Russia. Chinese enterprises can benefit from reductions and preferential policies in terms of insurance fees, land tax, profit tax, and property tax.

These preferential policies introduced by Russia are also aimed at better resisting the impact of Western sanctions. As the largest neighbors to each other and both being emerging market countries, China and Russia have strong cooperation resilience and ample potential. This will drive high-quality development of bilateral investment cooperation in the future.

China's foreign investment is highly attractive.

Since the reform and opening up, China has been closely connected with countries around the world, and the scale of foreign direct investment has been increasing year by year. The actual utilization of foreign capital in China has also improved since the reform and opening up. As China has become the world's second-largest economy, it has a great market appeal in terms of foreign investment.In the first half of this year, China's Gross Domestic Product (GDP) reached as high as 61,683.6 billion yuan, a figure that also represents the continuation of the upward phase of China's economy.

From 2013 to 2022, our country's scale of attracting foreign investment has steadily increased for 10 consecutive years. In the first half of this year, the scale of foreign investment attracted by our country approached 500 billion yuan, marking the highest point in nearly a decade.

Among them, the manufacturing industry accounts for 28.4% of the proportion of foreign investment, with a total of 141.86 billion yuan. The stability of China's domestic market has long-term appeal and can strengthen the service guarantee for investment in China.

The main sources of foreign investment in China are Asia, the European Union, North America, and some free trade zones. According to the Ministry of Commerce's foreign investment statistics, from 2017 to 2022, the overall number of investment enterprises from major countries and regions in China still shows a growth trend, especially with a significant increase in the number of South Korean investment enterprises in China.

After this year's Spring Festival, local governments have placed "stabilizing foreign investment" in an important position. For example, after the Spring Festival holiday, Shanghai launched a series of activities called "Tide Surges in the Pujiang" to invest in Shanghai and share globally. By continuously optimizing the business environment, it aims to attract more top-tier enterprises.

Zhejiang Province also held the 2024 "Thousand Projects, Trillion Yuan" major project plan, proposing a total investment of more than 1 billion yuan in provincial external domestic investment projects and foreign investment projects of more than 100 million US dollars, with 120 projects.

Fujian Province, in order to attract foreign investment, proposed 25 specific measures to ensure the national treatment of foreign-invested enterprises and to improve the level of operation.

The sixth-generation power battery project of the German BMW company located in Shenyang, Liaoning Province, was capped at the beginning of this year. The total investment of the plan is 10.2 billion yuan, and it is expected to complete the installation and commissioning of the production line this year, with plans to achieve mass production in 2026.

In addition, in Changzhou, Jiangsu, the second phase of the Changzhou Sedeli cellulose fiber project invested by the Singaporean Golden Eagle Group, with a total investment of 2.05 billion yuan, will complete mass production in the first half of this year.

In attracting foreign investment, local governments play an important role. The size of local governments, various supporting preferential policies for attracting investment, and the strength of government subsidies all become factors affecting foreign investment.Despite a series of economic sanctions imposed by the United States on China, this has not shaken China's position as the world's second-largest economy. While our country is attracting foreign investment, it is also actively developing domestic industries.

For instance, after Tesla was introduced to China in 2019, it had a significant impact on China's new energy vehicle industry. The arrival of Tesla stimulated the upstream and downstream of the domestic new energy vehicle industry and also increased the competitive pressure on domestic new energy vehicle manufacturers, allowing consumers to experience more affordable and advanced automotive products.

Tesla's entry not only promoted the development of China's new energy vehicle market but also facilitated the transformation of China's energy structure. The widespread adoption of new energy vehicles in China can effectively reduce oil consumption and environmental pollution.

The investment of foreign enterprises in China undoubtedly injects new vitality into the Chinese economy. However, we must also be aware that the entry of foreign enterprises into China can have certain impacts on domestic enterprises, and there may even be acquisitions or mergers, which can affect the stability of the market share.

The impact of foreign enterprises on domestic enterprises is complex and can be a double-edged sword. While it may bring some negative effects, it also brings many positive opportunities and challenges. How a country attracts foreign investment depends not only on political factors but also on the domestic business environment. It is not always about restricting others; the investment environment, policies, and economic prospects are all indispensable.