$2T Exit: India's Economy Faces 20-Year Recession
With every swing of the scythe, a nation inevitably falls. The essence behind the crises of '97, '08, and the Latin American debt crisis of the '80s was the landing of America's dollar scythe. Now, the dollar scythe is raised high, and judging by the recent actions of the Federal Reserve, it is about to descend.
The United States has reached the end of its interest rate hikes, and the debt ceiling has been reached. The country is in urgent need of substantial funds to fill its financial gaps. Before this, the U.S. has already targeted Vietnam, and now it may be turning its sights on India. Can India withstand this American harvest? Could India's economy potentially regress by two decades?
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Is the U.S. about to harvest India?
Shorting India and reaping its wealth may have already begun quietly. This time, India may not be able to escape the American harvest.
We are all aware of the previous news that India's richest man, Adani, was shorted, and his net worth was nearly halved, with assets evaporating by hundreds of billions. And we all know that only Wall Street capital can have such a significant impact.
Moreover, who else can fill America's gaps in the current situation? Many might argue that although shorted, the value eventually recovered, and the Indian tycoon does not represent the entirety of India.
However, this is not an isolated case in India. This year, India has launched multiple crackdowns related to foreign exchange remittances, and our domestic companies, Xiaomi and Vivo, have been investigated and even had their assets frozen for this very reason.
This indirectly indicates that India is currently very tense about foreign exchange.
According to relevant data, as of last month, the Indian rupee has depreciated by 12% against the U.S. dollar this year. And even when compared to the currencies of emerging countries, the depreciation of India's currency is substantial, with a decline exceeding the average of 9%.Simultaneously, as the Indian currency plummets rapidly, India's external debt is expanding at a swift pace. Moreover, India has been under the watchful eye of international institutions and is listed as one of the countries most in need of fiscal consolidation.
According to data released by the Reserve Bank of India in November, India's current foreign exchange reserves stand at around $550 billion, which is a significant drop of nearly 15% compared to the same period, marking a new low in the past two years.
This implies that India is currently facing a dilemma of capital outflow, which is why India is exceptionally anxious about remittances from multinational corporations, as the country's foreign exchange reserves are decreasing too rapidly.
In addition to the currency devaluation and the reduction of foreign reserves, India's foreign capital is also contracting on a large scale. Data from BWN, as reported by the National Securities Company of India, shows that this year, foreign investors have sold nearly 2 trillion rupees worth of financial assets, which is more than double the amount in 2008.
We are aware that the current U.S. interest rates are still high, which means that India will continue to face the predicament of constant capital outflow. With the U.S. interest rate hikes causing continuous bleeding and the withdrawal of foreign capital, India is currently caught in a pincer movement.
We also know that India's economic growth has been quite good in recent years, primarily due to the U.S.-China confrontation, from which India has reaped the benefits. However, as the U.S. and China are currently holding meetings, it suggests that these benefits may soon come to an end.
Thus, India is expected to return to its original position. While we cannot be certain about any implicit agreements reached between the U.S. and China, what we can confirm is that Biden has canceled the Indo-Pacific strategic agreement-related summit, signifying that India has been abandoned by the U.S. again.
From supporting India to replace China to Biden's abandonment, it has only been a few short years. Even the Governor of the Reserve Bank of India has come forward to call on foreign capital, stating that India has the capability to replace China and hopes for more foreign investment in India. However, trends cannot be changed.
Media have already released information about an "Asian currency defense war." Coupled with South Korea's restrictions on capital short-selling, we can understand the situation. The U.S. is preparing for a harvest, and perhaps the U.S.-China meeting is an effort towards this end. India is in danger.
Will the Indian economy regress by 20 years?India's economic regression may already be foreseeable. Southeast Asia in the past and Latin America once stagnated due to the United States' harvesting, and now India might also be mired in the quagmire.
We understand that the economic development of a country is essentially the process of the country's industrial development, and the development of industry has always been a process of capital intensification. In other words, to develop industry, continuous renewal is required, which leads to developing countries accumulating huge debts in the process of industrialization.
Currently, India is still in the stage of rapid industrial development, and its debt scale is continuously expanding. At the same time, India's trade surplus does not rely on domestic industrial products but depends on remittances from multinationals, that is, remittances from Indians working abroad.
Therefore, India's industrialization is inherently deformed in its development, and India does not have a solid heavy industry base like ours. So, although India seems to be developing well, it is all very illusory.
So Modi chose to cooperate with Adani, preparing to imitate South Korea's development path and re-enact the Indian version of the story between the country and the chaebol. However, does the United States really allow it?
Moreover, South Korea's development actually benefited from the dividends of the Vietnam War, and can today's India really rely on the dividends of the Sino-American confrontation to develop?
We also know that one of the reasons for India's rapid economic growth has been that India was once a British colony, so India has always been within the Commonwealth system. So, India has long been eating the dividends of the West.
However, we can see in recent years that the Western economy has also fallen into the quagmire. The high inflation in the European Union and the United Kingdom will inevitably devour a large amount of Western consumption capacity, and this will also greatly hit India's trade and capital circulation with the West.
In addition, we also know that India has always been relatively conservative, which has led to India's inability to fully integrate into globalization, which will also lead to India missing the dividends of future industrial revolutions.
Therefore, whether looking at the international situation of the Sino-American game or the path of India's industrial development, India is now a bit out of favor.Once, India could serve as a backup for the West to replace China, but today, with the easing of US-China relations, international capital will naturally choose the more advantageous option. Therefore, India's future is not clear. Lastly, the climate agreement reached between China and the US can be seen as a development agreement for new energy, which may be the most fatal blow to India.
In any case, the United States has already begun its harvest, and even US allies like South Korea have started preparing. India should be careful.
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