On Friday, India remained on the US Treasury Department’s currency watch list of major trading partners, as Washington placed India along with 11 other major economies that deserve close attention to their monetary practices and policies. macroeconomics.
The countries are China, Japan, South Korea, Germany, Italy, India, Malaysia, Singapore, Thailand, Taiwan, Vietnam and Mexico, the US Treasury Department said in its semi-annual report to Congress on the macroeconomic and exchange rate policies of the main countries. United States trading partners.
All but Taiwan and Vietnam (which received enhanced engagement) were on the watch list in the December 2021 report, according to a press release.
The Administration continues to advocate vigorously with our major trading partners to carefully calibrate policy tools to support a strong and sustainable global recovery. An uneven global recovery is not a resilient recovery. It intensifies inequality, exacerbates global imbalances and heightens risks to the global economy,” Treasury Secretary Janet L Yellen said.
Explaining its decision to keep India on the list, the Treasury said India met two of the three criteria in the December 2021 and April 2021 reports, having a large bilateral trade surplus with the United States and being engaged in persistent and unilateral intervention over the reporting period.
India has only reached the threshold for a meaningful bilateral trade surplus in this report, the Treasury said, adding that India will remain on the watch list until it meets less than two criteria for two. consecutive reports.
According to the report, India (with $569.9 billion) has the fourth largest foreign currency after China ($3.2 trillion), Japan ($1.2 trillion) and Switzerland (1 trillion dollars).
The RBI’s foreign exchange purchases in recent years have resulted in a high level of reserves. In December 2021, foreign exchange reserves stood at $570 billion, or 18% of GDP and 209% of short-term external debt at remaining maturity, he said.
In the 2021 External Sector Report, the IMF estimated that India’s reserves at the time stood at 197% of the IMF’s reserve adequacy measure at the end of 2020.
The Treasury said that, like many Asian emerging market peer currencies, the rupiah weakened against the US dollar during 2021, depreciating 1.9%.
Rupee volatility was pronounced in the first half of 2021 as the economy grappled with the second major outbreak of COVID-19; thereafter, the rupee depreciated steadily against the dollar for most of the second half of the year, he said.
By contrast, the rupee held up relatively well against the currencies of many of India’s regional trading partners – on a nominal effective and real effective basis, the rupee appreciated by 0.8% and 2.2% respectively in 2021, according to the report.
Indian authorities, he said, should allow the exchange rate to move flexibly to reflect economic fundamentals, limit foreign exchange intervention to circumstances of disorderly market conditions and refrain from further accumulation. significant reserves.
As the economic recovery progresses, the authorities should continue to pursue structural reforms that can help raise productivity and living standards, while supporting an inclusive and green recovery, the Treasury added.
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