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[Global Times reporter Yuan Jirong] India's Deccan Herald and other media reported on July 23 that the Indian Ministry of Finance released the Economic Survey 2023-2024 (hereinafter referred to as the Economic Survey) report on the 22nd, reviewing the performance of the Indian economy in the previous fiscal year, but surprisingly, in the report, the Indian government predicts that India's economic growth rate will slow to 6.5%-7% in the 2024-2025 fiscal year. In contrast, India's economic growth rate last year was as high as 8.2%. The Reserve Bank of India previously predicted that the economic growth rate in the 2024-2025 fiscal year would be 7.2%, and the average expectation of many economists gathered by Bloomberg was 7%. However, this report from the Indian Ministry of Finance believes that the current market expectations for the Indian economy are too high.

On July 4, workers in Kolkata, India, dismantled electronic waste in a second-hand market. (Visual China)

"There's a lot of speculation going on, it sounds like a casino"

The Economic Survey reported that as investors bet on global economic expansion, many financial markets around the world hit new highs in the past year, including the Indian stock market. So far in 2020, the Indian stock market has continued to rise, constantly setting new historical highs. According to the Financial Times, the benchmark Nifty 50 index of large Indian companies has doubled in the past five years, outperforming the resurgent Nikkei index, and even the US S&P 500 index has failed to keep up. Currently, the market value of Indian stocks has exceeded US$5 trillion.

Some investors and analysts worry that the growing enthusiasm is fueling a speculative bubble. Raging demand for Indian stocks could lead to a sharp correction in share prices that would scare off a new generation of investors, just as the dot-com bubble burst in Europe at the beginning of this century. "There's a lot of speculation, it sounds like a casino," said Agrawal, chairman of Motilal Oswal, an Indian diversified financial services company with millions of customers across India. "People are really selling puts and restructuring calls. It's crazy."

A Chinese company in India told the Global Times that "business here has not picked up yet, but I invested in Indian stocks in my spare time and made 50 to 60 times the money." The US financial media "The Street" reported that before the Hindenburg short report in 2023 pointed out that Adani Group was suspected of manipulating stock prices, the stock price of the Indian business giant had soared 25 times from the lowest point of the epidemic in the spring of 2020. After the short report was released, the market value of listed companies under the Adani Group evaporated by US$153 billion, revealing many problems in the Indian stock market. "Against the background of overvaluation in financial markets, any adjustment may have an impact on household finances and corporate valuations, and have a negative impact on growth prospects." The Indian government warned in the Economic Survey report.

The growth rate of personal investment and foreign investment slowed down

In addition, the report also predicts that India's private investment growth may slow down in the event of balanced risks. "After a good growth in the past three years, private capital formation may become slightly cautious due to concerns that imports from countries with excess capacity will become cheaper," the report said.

The report also raised the issue of the slowdown in foreign direct investment (FDI) in India, attributing the cause to the poor environment for FDI growth. India's net FDI inflows fell from $42 billion in fiscal 2023 to $26.5 billion in fiscal 2024. The report said that high interest rates in developed countries and rising financing costs for overseas investors have made it more difficult for India to attract foreign investment. In addition, the report believes that emerging economies now have to compete through active industrial policies, while developed economies have taken considerable subsidies to encourage domestic investment.

Zhen Bo, a researcher at the Southern Silk Road Economic and Cultural Research Center of Jinjiang College of Sichuan University, said in an interview with the Global Times on the 23rd that India's imperfect internal measures and the impact of the epidemic in the past few years are part of the reason for its poor overall investment environment. In addition, after the large-scale infrastructure investment from China was greatly reduced, other countries were not very interested in investing in India, which also led to the current situation.

Call for more Chinese FDI

India's TimesNowNews website reported that the Economic Survey urged India to increase FDI from China to strengthen local manufacturing and exports. China has become India's largest import partner. The trade volume between the two countries reached US$118.4 billion in 2023-2024, exceeding India's trade with the United States, and the trade deficit between India and China is expanding. Expanding Chinese investment can enhance India's participation in the global supply chain and improve its export performance.

In the latest federal fiscal budget released on the 23rd, Indian Finance Minister Sitharaman proposed to simplify FDI and overseas investment regulations to attract foreign investment, and reduce corporate tax from 40% to 35% to increase the interest of foreign investors.