Massive Sell-off: 3,200 Foreign Firms Exit, India Faces 20-Year Recession

At present,as the growth momentum of the U.S.financial market slows down,the benchmark ten-year U.S.Treasury yield soars back to a high of 4%,the U.S.Dollar Index rises for seven consecutive days by more than 1.6%,marking the largest single-week increase in two years,coupled with the U.S.non-farm data being exceptionally strong beyond expectations,reducing the necessity for interest rate cuts,and the record uncertainty of conflicts in the Middle East,the Federal Reserve is brewing a hurricane-like harvesting storm.

There is no doubt that the United States is currently transferring,shirking,and spilling over the risks of its continuously surging debt deficit,inflationary pressures,debt defaults,and economic recession by manipulating employment data and the fluctuations of the U.S.Dollar Index.

According to the explanation in an article published by the new Federal Reserve Correspondent on September 27,"Even if the Federal Reserve significantly cuts interest rates now,a 'soft landing' is still an unknown."

This further confirms that no matter how the Federal Reserve chooses the pace of interest rate cuts next,the U.S.financial market is already on the eve of a major liquidation,and the worst moment for the U.S.economy has not yet arrived.

Analysts believe that under these uncertain environments,investors in the U.S.financial market may be ready to press the sell button at any time,massively selling off iconic U.S.dollar assets,including U.S.Treasury bonds and U.S.bank deposits.

Bob Michele,a portfolio manager at J.P.Morgan Asset Management,believes that currently,there are nearly $6.5 trillion in U.S.money market funds ready to withdraw immediately after the Federal Reserve starts the interest rate cut cycle,with some turning to the Chinese market for higher yields.

In addition,according to data released by the London Stock Exchange on October 5,since August,investors have massively sold off U.S.stock funds worth $534.99 billion,which is the largest monthly net disposal since mid-December 2022.The outflow of funds has also hit the U.S.stock market.What should the Federal Reserve do at this time?

The answer is obvious.The United States will covertly continue to transfer the growing financial risks,thereby achieving the suppression of inflation and starting to continuously harvest some economies with obvious economic structure and financial debt problems to collect seigniorage.The economies,assets,and exchange rates of these markets will continue to be affected.

This makes the Indian economy shudder and may lead to a "flood and beast"-like tidal harvesting effect on the Indian economy.The credibility of damaged enterprises and the fragile financial debt market in India can easily be targeted by Wall Street.

For example,some Indian enterprises with financial fraud and credibility issues are currently in the process of being harvested by the United States and may become a catalyst for引爆 the financial crisis of the Indian financial system.The U.S.Wall Street institutions' high-profile short selling of "Indian tycoons" Adani since August 12 is the most vivid example.Analysis indicates that the short-selling and harvesting of Adani by U.S.institutions is merely the beginning.Under the pressure of a significant test to the credibility of India's economy and businesses,the broader Indian economy may face the risk of recession in the coming period.

It is evident that the current high U.S.dollar financing rates and external debt pressures are hitting economic activities in India.Additionally,the sluggish global economic development and ongoing conflicts in the Middle East,leading to rising oil prices and supply chain tensions,will also bring inflationary and demand pressures to India.

According to the latest report released by the IMF in September,India has the highest debt ratio among all emerging markets.As of March,India's national debt has risen to 58.9% of the country's nominal GDP,the highest level since 2018.Among this,external U.S.dollar debt for the fiscal year 2024 alone accounts for 18.9%.Currently,the total liabilities of the Indian federation amount to 160.69 trillion rupees.

This indicates that India's past high economic growth has been accumulated through massive U.S.dollar debt,and India does not possess a broad foreign exchange reserve moat.This will exacerbate market volatility in India and squeeze out international investments,especially in the Indian stock market and the manufacturing industry,which is subject to credibility questioning,as the U.S.begins the harvesting process.

For instance,European and American manufacturers who control most of the profits in India's manufacturing industry have started to withdraw since last year.Moreover,according to incomplete media statistics,at least more than 190 Indian-origin executives have been dismissed by U.S.companies this year.

We have noticed that reports of foreign enterprises withdrawing investments from India's manufacturing industry have been emerging for months.Since last year,a series of exclusionary measures implemented by the Indian economy have led to extensive media coverage of news that car manufacturers including Ford,General Motors,Harley-Davidson,BYD,and Tesla have refused to cooperate with India.This also includes internationally renowned companies such as Foxconn,Google,Amazon,Nokia,Samsung,Coca-Cola,and PepsiCo.

According to the latest data from the United Nations,from 2023 to August of this year,at least nearly 3,200 foreign enterprises registered in India have actively or passively closed their businesses in India,choosing to withdraw from the Indian market.These foreign enterprises account for about 35% of the total number of foreign investments in India,and more than 3 trillion rupees of manufacturing investments have withdrawn from India from last year to now.It is reported that Disney is also considering fleeing from India.

According to data released by an Indian official institution on October 5th,foreign funds,including those in manufacturing and financial markets,have withdrawn nearly 15 trillion rupees from India since India began to tighten its monetary policy in 2022.This is equivalent to four times the net outflow during the 2008 U.S.financial tsunami and at least the highest annual withdrawal in 20 years.

Citibank,a Wall Street institution,downgraded the rating of the Indian stock market again on October 4th.The current valuation of the Indian stock market is high,and the profitability of Indian companies is poor,indicating that it is time to take profits.This will be accelerated against the backdrop of the Indian Ministry of Finance's significant adjustment of stock investment returns and restrictions on the volume of stock derivative transactions for the first time in decades in July,which will further speed up the pace of foreign capital withdrawal from India.

According to temporary data released by the Bombay Stock Exchange on October 5th,foreign investors have sold more than 1 trillion rupees worth of stocks in the past seven trading days.This has also led to a sharp drop in the Indian currency.Due to concerns about a large amount of foreign capital withdrawing from the Indian stock market and the rise in oil prices due to conflicts in the Middle East,the Indian rupee fell near its historical low on October 5th.This indicates that the sustainability of the Indian economy and the world factory plan is not strong,further exacerbating the possibility of a potential economic downturn in India.Behind this lies the possibility that India often adopts radical measures to disrupt the economy,imposing exorbitant fines on foreign companies,and capriciously changing investment policies.

For example,in August last year,the Indian authorities suddenly announced restrictions on the import of laptops to promote local production.This measure caused panic in the industry,and such interventionist policies can also dampen the enthusiasm of investors.

Therefore,these series of signs all indicate that Morgan Stanley,an American investment bank,predicted in its report updated and published on October 6 that India is unlikely to become a global manufacturing center and the world's factory,with its "potential" being overestimated.

It is worth mentioning that on September 11,near New Delhi,the Indian authorities stated at a chip conference that India is striving to achieve a $500 billion electronics industry target by the end of this century.

It is clear that the withdrawal of these global manufacturing companies from India has dealt a significant blow to the Indian authorities' ambitions to attract foreign investors to achieve the status of a world factory.

According to the latest data from the Indian statistical department,as of September 2024,more than 1.012 million companies in India have gone bankrupt or been deregistered.The main obstacles they face in India include: "capricious regulations,high tariff barriers,procurement rules that limit competitive choices,red tape,complex land policies,infrastructure issues,and other issues related to the ease of doing business."

For example,Foxconn's investment in India has also encountered many difficulties,and the situation finally took a huge turn a few weeks ago.In July 2024,Foxconn announced that it would invest 1 billion yuan to rebuild a new headquarters building in China.Even major customers like the American Apple mobile phone have returned some of the industrial chains that were previously transferred to India back to China.

For example,recently,the manufacturing factories of Apple and Samsung have also encountered pitfalls in India one after another,and their manufacturing capacity has been severely impacted.In September this year,workers at Samsung's southern India factory staged an unprecedented strike that could shake the foundation of India's economy to express their dissatisfaction with relevant Indian government departments.

Subsequently,on September 28,due to poor management,a fire broke out at the Tata Electronics factory in southern India,which is used to produce parts for Apple mobile phones.The factory then announced an indefinite suspension of production.It is understood that this is the only supplier in India that manufactures mobile phone back plates and other parts for Apple,forcing Apple to allocate key parts from China and other places.If this Indian manufacturing factory cannot resume production in time,Apple may set up another production line in China.

All evidence shows that India's labor costs seem very cheap,but the chaotic management of this economy means low productivity.Indians actually no longer have enough motivation to develop innovative and rational thinking abilities.The consequences of this have been that manufacturing factories and functional departments in India,including those in the private sector,are filled with chaos,waste,and an inability to plan or follow systems.The editor-in-chief of the Financial Times Asia,Pilin,also believes that while "Made in India" sounds impressive,it is in reality a "mirage."

It is clear that the return initiatives of these Indian manufacturing factories have undoubtedly brought unprecedented challenges to India's "pride" in the "Make in India" initiative and are causing other foreign companies investing in India to follow suit.This is because these international factories investing in India eventually realize that the best,most skilled,and most efficient workers are in China,and India also has issues with inadequate infrastructure.

A study published by the World Bank in April estimated that India needs infrastructure investment of up to $1.7 trillion to $2.2 trillion.Three years ago,India proposed a plan to spend 692 billion rupees on infrastructure projects such as roads and bridges,but the latest news and some signs indicate that there has not been much change in India's infrastructure to date.

In response,according to the former Chief Economic Advisor to the Ministry of Finance in India,who was interviewed by the media again on October 5th,"Although India has achieved some good growth data in the past,if it cannot effectively deal with the current withdrawal of manufacturing enterprises and the credibility issues caused by the United States harvesting Indian enterprises,against the backdrop of a slowdown in global economic growth and ongoing conflicts in the Middle East,then India is very likely to experience a 20-year recession,especially in the manufacturing export industry,which is also one of the reasons why a significant number of wise investors have recently withdrawn from India in advance."