India: US says it could remove India from currency monitoring list

  • India could be removed from US’ currency monitoring list of major trading partners, the Treasury Department has said, citing certain developments and steps being taken by New Delhi which address some of its major concerns.
  • India for the first time was placed by the US in its currency monitoring list of countries with potentially questionable foreign exchange policies in Apr 18 along with five other countries – China, Germany, Japan, South Korea and Switzerland.
  • The Department of Treasury maintained the same monitoring list in its latest report released on 17 Oct 18 but said if India continued with the same practices as in the last six months, it would be removed from its next bi-annual report.
  • “India’s circumstances have shifted markedly, as the central bank’s net sales of foreign exchange over 1H18 led net purchases over the four quarters through 2Q18 to fall to USD4bn, or 0.2% of the GDP,” the Treasury said in its latest semi-annual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the US.
  • This represented a notable change from 2017, when purchases over the first three quarters of 2018 pushed net purchases of foreign exchange above 2% of the GDP, it said.
  • India has a significant bilateral goods trade surplus with the US, totalling USD23bn over the four quarters through 2Q18, but India’s current account is in deficit at 1.9% of the GDP.
  • “As a result, India now only meets one of the three criteria from the 2015 Act. If this remains the case at the time of its next report, Treasury would remove India from the monitoring list,” the Treasury said.
  • The Treasury praised India for being “exemplary” in publishing its foreign exchange market intervention.

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