India's exclusion from the US' currency manipulator watchlist won't come as a great benefit for India, just as inclusion in the list a year ago did not much of a harm.
The inclusion is a pressure tactic, and is mainly targeted at China, say experts. Interestingly, the US didn’t found any country as a currency manipulator, including China. But China now features in the watchlist, with eight others. The reference of India has been dropped from this watchlist.
India’s inclusion in the list was on technical ground, as it had accumulated huge amount of foreign exchange reserves. When a country hordes US dollar, it weakens its own domestic currency. The idea of currency manipulation stems from that.
Now, the other two criteria in which India was included in the list -- running a large bilateral surplus and running a large current account surplus against US were analytically wrong, experts say.
Of course, hoarding of US dollar is a different aspect and India had to do it for its own hygiene, rather than for gaining a trade surplus against the US. Of course, such surplus could be a side effect.
When it comes to China though, these currency manipulation tactics make sense, as China did not let its currency appreciate through pegged intervention.
“The exclusion is good in a sense that the US won’t breathe down on India’s neck. The inclusion was hygiene check and nothing much to start with,” said Soumyajit Niyogi, associate director of India Ratings and Research.
A chief economist of a private sector bank, requesting not to be quoted, said the inclusion was absurd to start with. And India really did not lose anything after the inclusion. However, India had trade restrictions put on it for other reasons, mainly retaliatory in nature. The exclusion, doesn’t add any extra benefit too, but irons out extra creases in trade talks.
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