US adds India to Currency Manipulation Watchlist after removing it in 2019

New Delhi, Dec 17: The US on Wednesday added India to the 'monitoring list' of currency manipulating countries that includes major trading partners like China and six others.

The other countries on the monitoring list are Japan, South Korea, Germany, Italy, Singapore and Malaysia. Ireland has been removed from the Monitoring List, the US Department of Treasury said in its report 'Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States' submitted to the Congress on Wednesday.

It also added Taiwan and Thailand to the list.

While India had been included in this list in 2018, it was removed in 2019. The newly adding comes after the Indian central bank stepped up purchases of foreign currency as portfolio flows surged in the second half of the year.

The US Treasury uses three benchmarks to judge currency manipulators. A bilateral trade surplus with the US of more than $20 billion, a current account surplus of at least 3 per cent of GDP and net purchases of foreign currency of 2 per cent of GDP over a 12-month period. India breached the first and the third benchmarks. On the second, on a four-quarter basis, the country's current account surplus remained below the threshold level.

"India for several years has maintained a significant bilateral goods trade surplus with the United States, which totaled $22 billion in the four quarters through June 2020," the report said. The economy's first four-quarter current account surplus since 2004 stood at 0.4 per cent of GDP over the year to June 2020, it said.

"Treasury continues to welcome India's long-standing transparency in publishing foreign exchange purchases and sales," the report also said, adding that it encourages the authorities to limit foreign exchange intervention to periods of excessive volatility, while allowing the rupee to adjust based on economic fundamentals.