US adds India to currency watch list
Washington: The US has added India to the currency practices and macroeconomic policies monitoring list, saying New Delhi increased its purchase of foreign exchange over the first three quarters of 2017 which does not appear necessary. India is the sixth addition to the watch list which comprises China, Japan, South Korea, Germany and Switzerland.
"India increased its purchase of foreign exchange over the first three quarters of 2017. Despite a sharp drop-off in purchase in the fourth quarter, net annual purchase of foreign exchange reached USD 56 billion in 2017, equivalent to 2.2 per cent of the GDP," the US Department of the Treasury said in its semi-annual report to the Congress.
The pick-up in purchases came amidst relatively strong foreign inflows, both of foreign direct investment and portfolio investment, it said. Notwithstanding the increase in intervention, the rupee appreciated by more than six per cent against the dollar and by more than three per cent on a real effective basis in 2017, it noted.
Treasury told the Congress that India has a significant bilateral goods trade surplus with the US, totalling USD 23 billion in 2017, but India's current account is in deficit at 1.5 per cent of the GDP and the exchange rate is not deemed to be undervalued by the IMF.
"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 Treasury said, explaining the reasons for adding India to the list.