The US Treasury Department (USDT) has retained India among other countries in its currency manipulator watch list. India, understood to be a strategic ally of the United States in the Asia Pacific, has found itself in the list for a second time in a row.
India was first added to the list in December 2018 but removed in 2019 and again got a mention in the list in December 2020. The currency manipulator watch list includes the countries that are suspected of intervening in their foreign exchange (forex) markets to gain an unfair trade advantage.
What does it take to determine a ‘currency manipulator’?
The US treasury department has set three parameters to determine whether an economy has manipulated its currency.
India has met two out of the three above-mentioned parameters, resulting its name getting added to the list.
What does the USDT say of India?
The US treasury report named India as one of its five major trading partners that "intervened in the foreign exchange market in a sustained, asymmetric manner with the effect of weakening their currencies".
"Over the four quarters through December 2020, five major US trading partners — Vietnam, Switzerland, Taiwan, India and Singapore — intervened in the foreign exchange market in a sustained, asymmetric manner with the effect of weakening their currencies," read the report released on April 16.
"While the RBI frequently intervenes in both directions, RBI purchased foreign exchange on net in 11 of the 12 months of 2020, with net intervention reaching $131 billion, or 5 percent of the GDP," the report added.
India's current account recorded a surplus of 1.3 percent of GDP in 2020, marking a shift from the consistent current account deficits on record since 2004, the US Treasury Department noted, in addition to India's goods trade surplus with the United States of $24 billion in 2020.
India also had an $8 billion services trade surplus with the United States in 2020, according to the report.
India’s response
New Delhi does not see any logic in the United States placing India on a watch list of currency manipulators, mentioned a Reuters report quoting a commerce ministry official.
Which other countries are listed along with India?
Eleven economies on the "Monitoring List" include China, Japan, South Korea, Germany, Ireland, Italy, India, Malaysia, Singapore, Thailand, and Mexico.
