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U.S. currency watchlist an intrusion into policy official

Topics Covered: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

U.S. currency watchlist an intrusion into policy: official:


Context:

Indian Commerce Secretary Anup Wadhawan has questioned the rationale behind the U.S. government’s decision to put India on the watchlist for currency manipulators.

  • Besides, the list also constituted an intrusion into the policy space needed by central banks around the world to meet their mandates.

What’s the issue?

The U.S. Treasury Department had recently retained India on a watchlist for currency manipulators submitted to the U.S. Congress, citing higher dollar purchases (close to 5% of the gross domestic product) by the Reserve Bank of India (RBI).

  • Another trigger for the inclusion on the currency watchlist is a trade surplus of $20 billion or more.

Background:

It is a mandate of the central bank to provide stability in the currency as a result of which central banks buy and sell foreign currency.

What is currency manipulation?

The US Treasury department defines currency manipulation as when countries deliberately influence the exchange rate between their currency and the US dollar to gain “unfair competitive advantage in international trade”.

InstaLinks:

Prelims Link:

  1. US Currency Manipulators list.
  2. Countries in watch list.
  3. Criteria.
  4. Implications.
  5. India’s position.

Mains Link:

What are India’s Concerns against the US Currency Watch List? Discuss.

Sources: the Hindu.