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Home / Business / India trashes US's currency manipulator charge

India trashes US's currency manipulator charge

Centre insisted that the RBI's interventions in the currency market were balanced and warranted while denying that the central bank was beefing up its foreign exchange reserves

Our Bureau   |   New Delhi   |   Published 21.04.21, 03:40 AM

The Centre has rejected the grounds on which the US treasury department classified India as a potential currency manipulator. It insisted that the Reserve Bank of India's interventions in the currency market were balanced and warranted while denying that the central bank was beefing up its foreign exchange reserves with an ulterior objective.

For the second time since the start of the pandemic, India on Monday figured on the US treasury department’s watchlist of currency manipulators. The central bank’s dollar purchase at 5 per cent of the gross domestic product (GDP) exceeding the 2 per cent threshold was cited as the reason.

Commerce secretary Anup Wadhawan said that these watchlists are a recent phenomena and it is an intrusion into the policy space of central banks, which “I personally do not understand its rational or economic logic”.

He said that India’s overall forex reserves have been fairly steady, below $500-600 billion, and the country is not accumulating reserves like China.

“These are, in my view, very legitimate market based operations of a central bank. It is a mandate of the central bank to provide stability in the currency, as a result of which the central bank buys and sells foreign currency . Our overall forex reserves have been fairly steady.”

“We are not accumulating reserves, which are steadily growing. We have a steady pattern of reserves holding...So I think the central bank's activity in the foreign exchange market has been perfectly balanced and completely legitimate,” he told reporters.

The US treasury department last week put India and 10 others on its “monitoring list” that needed a close scrutiny of currency practices.

The latest move by the US to put India on the watchlist may discourage the Reserve Bank of India  from aggressive intervention in the foreign exchange market, reports quoting some economists said.

When asked about the proposal of India and South Africa at the World Trade Organisation (WTO) about the temporary waiver of certain provisions related to an agreement on intellectual property rights to deal with the Covid-19 pandemic, Wadhawan said that proposal has received “widespread” support from different members, while some nations have opposed that.

“The proposal has met with tremendous success and more importantly highlighted the importance of the issue,” he said.

On a question whether the government is planning to waive 10 per cent customs duty on Covid vaccines, the secretary said that departments of revenue and pharmaceuticals would take a joint decision on that, but “I do not have any information on that”.

On oxygen supply in the country, he said although the issues are being coordinated by the Department for Promotion of Industry and Internal Trade (DPIIT), on war footing and efforts are underway to make supplies available. This is being coordinated on 24x7 basis and the supply position has improved tremendously.

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