Introduction: Recently, the topic of "Indian economy surpasses Britain" has caused heated discussion. Almost at the same time, the " Indo-Pacific Economic Framework " (IPEF), led by the United States, ended its first two-day round of offline ministerial talks. However, India, as a "key link" of the framework, announced after the meeting that it temporarily withdraws from negotiations in the trade field, one of the four pillars of the framework, on the grounds that "there is no benefit for the time being". How do you view India’s current economic development model? While foreign media are optimistic about India's economy, are foreign capital optimistic about India? Regarding these issues, Liu Zongyi, Secretary-General of the China and South Asian Research Center of Shanghai Institute of International Studies, made the following interpretation:
Observer.com : Bloomberg recently reported: According to the GDP statistics released by International Monetary Fund , the Indian economy surpassed the UK in the last quarter of 2021 and continued to expand its leading position this year. It has now become the fifth largest economy in the world after the United States, China, Japan and Germany. Why did India achieve such results? What did India do right in terms of industrial policies?
Liu Zongyi: India surpasses the UK is a major trend because its size is here, and as an emerging economy with latecomer, it has latecomer advantages and growth rate is relatively fast. In 2016, many people said that India would soon surpass the UK, but the realization was 6 years later.
Since India implemented economic liberalization reform in 1991, it has continuously promoted some reform measures to eliminate domestic and external market barriers at home. The general trend of economic development has been upward, which is also the result of its integration into economic globalization. Overall, India's economic growth has risen and fallen with the cycle of the global economy. Of course, after Modi came to power, some measures such as abolishing money, GST reform, as well as supporting local industries and anti-globalization, which caused certain ups and downs in India's economic development.
From an internal perspective, India's economic growth also has its own characteristics. One of the biggest characteristics is that its economic growth over the past few years is its main driving force for domestic consumption, which has always accounted for about 60% of India's GDP, which reflects the population size benefits.
India has a population of about 1.4 billion, and the Indian economy is a "double binary" economy. Not only are there big differences between cities and rural areas, but there are also large-scale slums within cities. Although there is a huge gap between the rich and the poor between urban and rural areas and between different social classes in cities, the poor need to solve the problem of survival, and the rich have the need to continuously improve their living standards. This domestic demand contributed the largest share of the development of India's national economy.
has settled in recent years. The reason why India's economic growth is relatively fast is also closely related to the Modi government's expansion of public spending and the development of infrastructure. Although there is a high fiscal deficit, the Modi government has vigorously invested in infrastructure construction, which has a significant effect on driving the economy.
So why is the GDP growth figure so high in the second quarter of this year because it is a year-on-year growth. Indians' own predictions are higher than the current 13.5%, while Reserve Bank of India's 's prediction is 16.2%. In the same period of 2021, it happened to catch up with the severe COVID-19 pandemic, and its current GDP increased by 13.5% year-on-year on the basis of that time.
In the first quarter of fiscal year 2019-20, India's GDP calculated at constant price (based on base period in fiscal year 2011-12) was approximately Rs 35.66 trillion, Rs 26.95 trillion in the first quarter of fiscal year 2020-21, Rs 32.38 trillion in the first quarter of fiscal year 2021-222, and Rs 36.85 trillion in the first quarter of fiscal year 2022-23 this year. That is to say, from the first quarter of fiscal year 2019-20 to now in the first quarter of fiscal year 2022-23, India's GDP grew by about 3.3%.
At present, we have indeed seen that India's economy is relatively active recently. In its publicity and reports, the United States, India and the West also emphasized that India "has emerged from the new crown epidemic" and can develop its economy with a more open attitude. This is actually targeted. After the complete relaxation, the service industry will first stimulate economic growth. Subsequently, India's tourism, hotel and transportation industries have all grown relatively quickly, or recovered relatively quickly, which has greatly boosted its GDP growth.But overall, people's consumption is still relatively conservative compared to before the epidemic.
On May 6 last year, people queued up in New Delhi, India to receive the new crown vaccine . Xinhua News Agency Photo
Observer Network: Judging from recent reports, many foreign media are optimistic about India's current economic development momentum. So is foreign capital optimistic about India?
Liu Zongyi: There are two types of foreign investment. The first is direct investment. In the past two years, India's share of foreign direct investment attracted worldwide has declined, from 3.4% to 2.8% from 2019 to 2021. Foreign capital withdraws from India because India has adopted some strict control measures on foreign capital. What is particularly notable is that it has adopted some very unfriendly practices for Chinese-funded enterprises, and its capital measures for other countries may be slightly more relaxed.
Although India now excludes Chinese capital, they hope to attract American and Western capital that can bring high-tech technology to India. Of course, I think their demand for Western capital has a clear purpose - to bring technology to them and then promote development. If these capitals also make high profits in the Indian market, then India may also take some measures against it.
India generally does not want foreign capital to make money in its market, this is the basic mentality of Indians. A report some time ago said that data from the Indian government showed that over the past seven or eight years, more than 2,000 multinational companies have suspended their operations in India. It is particularly ironic that although Americans hope that the United States and the West can invest large-scale in India and then replace China, in fact, direct investment in Europe and the United States in India has declined steadily in the past two years, especially now that the United States is the largest source of foreign direct investment in the world, currently accounting for nearly one-quarter of the global FDI outflow, even slightly higher than EU , but the United States' direct investment in India has dropped by 1/4.
The second situation is the capital market. We can see that there are many hot money constantly entering and leaving the Indian stock and securities markets to obtain benefits, which has a great impact on India's financial stability.
Observer Network: You mentioned before that some Indian think tanks believe that the present is the "critical period" for Indian manufacturing to catch up with China. So, in order to survive this critical period, what preparations have they made and what incentive policies have they introduced?
Liu Zongyi: They have taken specific measures in many industries, the most obvious one is in the mobile phone industry. Another typical example is the pharmaceutical industry, because about 70% of the active ingredients of the raw materials or drugs are imported from China, so they are now actively promoting Indian companies to replace China. India launched the Production-Linked Incentive Program (PLI) in 2020, through fiscal incentives, it encourages Indian companies and foreign capital to strengthen India's independent production capacity building in industries that are heavily dependent on "Made in China".
Indian government departments have detailed industrial plans for China, and have formulated a very detailed catalogue, counting how many products need to be imported from China on a large scale, how many products can replace China, and which products can replace China in the future, and how much profit India can get from it.
In addition, it is to vigorously promote the import of third-country products to replace Chinese products, and Western capital to replace Chinese capital. They have been implementing this kind of plan for several years, at least since the Sino-US trade frictions began, and then after the outbreak of the Wuhan epidemic in 2020, they officially made drastic progress.
Now we can see India's opening up to the outside world, and its direction is very clear. For example, it refuses to join RCEP, but it chooses to sign the free trade agreement with European and American countries, as well as those countries that can maintain their surplus advantage in bilateral trade. It hopes to earn foreign exchange in foreign trade . Including the "Indo-Pacific Economic Framework" that is currently in the first round of ministerial negotiations, India tends to projects that can promote its technological progress and industrial upgrading, and industries that can promote it to replace China's position in the global industrial chain and value chain.
Screenshot of the Hindustan Times report: Frankly saying that "no benefits are seen", India temporarily withdraws from the trade negotiations in the "Indo-Pacific Economic Framework"
Some time ago, the famous Indian strategic scholar Raja Mohan wrote an article to criticize my view on India as " surreal ists". I don't want to spend too much verbal refutation, but the problem is that India's actual foreign policy and foreign economic policy do.
Observer Network: Is India's current development momentum sustainable? The National Bank of India estimated that "GDP is expected to surpass Germany in 2027, and is likely to surpass Japan in 2029 and become the top three in the world". How likely is it to achieve it?
Liu Zongyi: On the 75th anniversary of India's independence, Modi proposed to build India into a developed country by 2047. This plan is two years ahead of our China, because we hope to build a prosperous, democratic, civilized and harmonious modern socialist country on the 100th anniversary of the founding of the People's Republic of China, and gradually and ultimately successfully realize the great rejuvenation of the Chinese nation. So from this point of view, India hopes to surpass China. Of course, whether it can surpass China is a question mark.
From a general trend, I think given India's size and this latecomer advantage in economic development, it is a high probability that its economic growth rate will surpass Western countries for a considerable period of time. At least it will continue to narrow the gap with countries like Japan and Germany. Of course, this also requires India to ensure the quality of economic development, and all cow dung cannot be included in the statistics.
Recently, some Indian scholars have proposed that India and China should redefine what developed countries are. This view is more interesting, but to a certain extent reflects the true thoughts and vanity of Indians.
At the same time, India is indeed ambitious, and we cannot underestimate India's ambitions. In the past few years, every time I went to India for research, I found that India has always changed and it is indeed developing. The key now is whether India's development strategy and development idea that will replace China at the expense of China and achieve its own economic take-off and rise of a great power is correct. From China's perspective, we hope that China and India can achieve development together so that " Asian Century " can be realized.
After the Galwan conflict in June 2020, Raja Mohan published several articles accusing: China's position on India's territorial border issue has undermined the unity of Asia and hindered the realization of the "Asian century".
Recently, Indian Foreign Minister Su Jiesheng also often talked about the "Asian Century", saying that "the prerequisite for the Asian Century is that India and China come together. On the contrary, if they cannot come together, they will inevitably be weakened." "...The state of the border will determine the state of the relationship between the two countries." Its internal logic is in line with Raja Mohan.
The concept of "Asian Century" was first proposed by Comrade Deng Xiaoping when he met with former Indian Prime Minister Rajiv Gandhi in 1988. At that time, he meant that China and India, as two ancient civilizations in Asia, and the two largest developing countries, can only achieve the "Asian Century" by working together and achieving development. It does not mean that China must meet all India's requirements in order to cooperate, and does not mean that China must fully accept India's proposition on the issue of territorial borders. Of course, China has always hoped that both sides could resolve the territorial border issue peacefully through negotiations.
Realizing the "Asian century" does not mean that China cannot fight back when India continues to push forward and encroach on Chinese territory in the border areas. Judging from a series of negotiations between the Chinese and Indian troops in the border areas since the Galwan conflict, China has great sincerity for peaceful negotiations to resolve border disputes.
Now it seems that India's chosen rise strategy is completely inconsistent with the spirit of China and India in common development to realize the "Asian century". The path and rise strategy that India has chosen now is to realize the "Asian century" under the premise of dividing Asia through Quad, and to contain China and locking down China.This is obviously contrary to the concepts and spirit mentioned by Comrade Deng Xiaoping at that time.
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