US adds India in currency monitoring list along with China

The list is a part of the semi-annual report on ‘Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States’.

NEW DELHI: The United States has included India in “the monitoring list” of its “major trading partners that merit close attention to their currency practices and macroeconomic policies”.

The list is a part of the semi- annual report on “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” prepared by the US Department of Treasury for the US Congress.

The report, which was submitted to the US Congress on 13 April, included the list which comprised of China, Japan, South Korea, Germany, Switzerland, and India.

“The Treasury Department is working vigorously to ensure that trade is free, fair, and reciprocal so American workers and companies can compete and succeed globally,” said US Treasury Secretary Steven T. Mnuchin.

“We will continue to monitor and combat unfair currency practices, while encouraging policies and reforms to address large trade imbalances.”

Accordingly, once listed, the concerned country would remain on it for at least two consecutive report cycles which is submitted to the US Congress “to help ensure that any improvement in performance versus the criteria is durable and is not due to temporary factors”.

On India, the report said that the country increased its purchases of foreign exchange over the first three quarters of 2017.

“Despite a sharp drop-off in purchases in the fourth quarter, net annual pur- chases of foreign exchange reached $56 billion in 2017, equivalent to 2.2 percent of GDP (Gross Domestic Product),” the report said.

“India has a significant bilateral goods trade surplus with the United States, totaling $23 billion in 2017, but India’s current account is in deficit at 1.5 percent of GDP and the exchange rate is not deemed to be undervalued by the IMF (International Monetary Fund).”

Given that Indian foreign exchange reserves are ample by common metrics, and that India maintains some controls on both inbound and outbound flows of private capital, further reserve accumulation does not “appear necessary” the report observed.

Regarding China, the report said: “China has an extremely large and persis- tent bilateral trade surplus with the United States, by far the largest among any of the United States’ major trading partners, with the goods trade surplus standing at $375 billion over the four quarters through December 2017, an increase of $28 billion over 2016.”

“Over 2017, the Chinese currency generally moved against the dollar in a direction that should, all else equal, help reduce China’s trade surplus with the United States; however, on a broad, trade-weighted basis, the Renminbi was broadly unchanged on net over 2017,” it said.

The report observed that the increasingly non-market direction of China’s economic development poses growing risks to its major trading partners and the long-term global growth outlook.