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Current Affairs

India removed from US currency monitoring list

Date: 30 May 2019 Tags: India & World

United States (US) Treasury Department has removed India from its currency monitoring list of major trading partners, citing certain developments and steps being taken by India which address some of its major concerns. Switzerland is the other nation that has been removed from this list. However, China, Japan, South Korea, Germany, Italy, Ireland, Singapore, Malaysia and Vietnam are still placed in this list.

This is positive development for India as it is out of currency watch list radar, which could have ultimately led to tag of being a currency manipulator.

What is currency monitoring list?

It includes countries with potentially “questionable” foreign exchange policies and practice currency “manipulation”. This list is prepared by US Treasury Department in its semi-annual report- International Economic and Exchange Rate Policies which is then presented to US Congress .

Countries are placed in it based on three pre-conditions viz. (i) Trade surplus of over $20 billion with US, (ii) current account deficit (CAD) surplus of 3% of the GDP and (iii) Persistent foreign exchange (forex) purchases of 2% plus of GDP over 12 months.

Reasons for removing India

India has been removed from list for addressing some of US Government’s concerns over its currency and macroeconomics practices. India has not met only one out of three criteria viz. significant bilateral surplus with US – for two consecutive reports.

According to US, India’s circumstances have shifted markedly, as its central bank’s net sales of foreign exchange (forex) over first six months of 2018 led net purchases over four quarters through June 2018 to fall to US $4 billion, or 0.2%of GDP

Background

India for the first time was placed by US Treasury Department in its currency monitoring list of countries with potentially questionable foreign exchange policies in May 2018 along with five other countries –Germany, China, South Korea, Japan and Switzerland. In its next report in October 2018, it had said that India has made improvements and its name will be removed from the currency manipulation list in the next report.