US Puts India on Currency Watchlist

US Puts India on Currency Watchlist

Part of: GS Prelims and GS-II – International Relations & GS-III – Economy

In news

• Recently, the US treasury has placed India on its currency manipulator watch list.
• Vietnam and Switzerland have been labelled as currency manipulators.

Key takeaways

• USA lists those countries which it feels are engaging in unfair currency practices by deliberately devaluing their currency against the dollar.
• The US Department of Treasury releases the semi-annual report where it has to track developments in international economies and inspect foreign exchange rates.
• Lowering the value of its currency provides an unfair advantage to that particular country over others. 
• This is because the devaluation would reduce the cost of exports from that country and artificially show a reduction in trade deficits as a result.
• A country which meets two of the three criteria of the Trade Facilitation and Trade Enforcement Act of 2015 is placed on the Watch List. This includes: (1) A significant bilateral trade surplus with the US which is at least USD 20 billion over a 12-month period; (2) A material current account surplus equivalent to at least 2% of GDP over a 12-month period; (3) Persistent one-sided in at least six out of 12 months.
• Inclusion in the list does not subject to any kind of penalty and sanctions but it deteriorates the global financial image of the country.