On a day when US treasury secretary Janet Yellen is on her maiden trip to India, Washington has removed New Delhi from its “currency monitoring list”.
In its biannual report to the Congress, the US department of treasury said the countries which have been removed from the list have met one out of three criteria for two consecutive reports. It also removed Italy, Mexico, Thailand and Vietnam from the monitoring list.
India was removed by the US from the currency manipulator watchlist in 2019 but it was again put in the list in December 2020. The watch list typically includes the countries that, the US suspects, are intervening in their foreign exchange markets to gain an unfair trade advantage.
In 2021, the treasury department had, once again, put India on the “monitoring list”, along with 10 other economies, including Singapore, Thailand and Mexico. It had stated that the currency practices of these nations required close attention.
India has often criticised the US’ move, stating it’s devoid of logic and that the country has never been a currency manipulator. India needs to limit foreign exchange intervention to “circumstances of disorderly market conditions, and refrain from excessive reserve accumulation,” the Treasury’s report had said in 2021, citing greater purchases of dollars by the RBI on account of capital flows.
The US treasury usually puts a trading partner on its watchlist if that country has intervened in the currency market by higher levels than 2% of its GDP over a year, and had a current account surplus above a stipulated level. Its net purchases of foreign currency, too, also need to exceed 2% of GDP over one year.