The US government has removed India from its currency monitoring watchlist. The countries in the list will be closely monitored by the US for the potential questionable foreign exchange policies.
Currency Watch List
The US includes major trading partners in the monitoring list if they meet at least two of the following three criteria:
- If it has either a significant bilateral trade surplus with the US.
- If it has a material current account surplus.
- If it is engaged in persistent one-sided intervention in the foreign exchange market.
Why India was added in the Currency watch list?
India was included in the list in 2018 because
- India had a trade surplus of over $20 billion.
- In 2017 India s foreign exchange purchases over the first three quarters of the year pushed net purchases of forex above 2 per cent of GDP.
- After making purchases in 2017, RBI had steadily sold reserves in 2018 and the net sales of foreign exchange reaching 1.7 per cent of GDP over the year
Bridging the Trade Deficit
India is under consistent pressure from the US for a favourable deal in Trade. The US has been mounting pressure on India by increasing tariffs on products like steel and aluminium and removing it from its Generalized System of Preferences, which allowed Indian businesses certain trade benefits.
India has attempted to reduce its trade surplus with the US. Purchasing India s imports of larger products like aircraft from US companies could help offset it going forward.