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India on U.S.’s Currency Watchlist

Part of: GS Prelims and GS-II International Relations

In news

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

Key takeaways

Another trigger for the inclusion on the currency watchlist is a trade surplus of $20 billion or more.
India’s trade surplus with the U.S. grew by about $5 billion to $23 billion in 2020-21 as imports fell more sharply than exports in the COVID-affected year.
According to India, the RBI had been taking necessary steps to maintain stability in the financial markets and not accumulating forex reserves.
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.
India’s overall reserves have been fairly steady at $500 billion to $600 billion.

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