“I don’t understand any economic logic,” Anup Wadhawan, India’s commerce secretary told reporters. The Reserve Bank of India is following a policy that allows currency movements based on market forces, he said.
Last week, the U.S. Treasury Department put India along with 10 other economies including Singapore, Thailand and Mexico on the “Monitoring List” that it said required close attention to their currency practices.
The official said India’s trade surplus with the United States had gone up by nearly $5 billion in the financial year 2020/21 that ended on March 31.
India’s bilateral trade surplus in goods with the United States totalled $24 billion in 2020, along with a services trade surplus of $8 billion, the U.S. report said.
Indian authorities should limit foreign exchange intervention to “circumstances of disorderly market conditions, and refrain from excessive reserve accumulation,” the report said, while citing higher purchases of dollars by the central bank on account of capital flows.
Some economists said the latest move by the United States to put India on the watchlist may discourage the central bank from aggressive intervention in the foreign exchange market.
Source: Economy - investing.com
