U.S. adds India to currency watch list with China

Note4students

Mains Paper 2: IR | Effect of policies & politics of developed & developing countries on India’s interests, Indian diaspora

From UPSC perspective, the following things are important:

Prelims level: Currency monitoring list

Mains level: Trade war between various nations and its impact on India


News

Currency monitoring list

  1. The U.S. Treasury added India to its watch list of countries with potentially questionable foreign exchange policies, joining China and four others (Germany, Japan, Korea and Switzerland)
  2. The “monitoring list” includes those major trading partners of the US that merit close attention to their currency practices

Why this list?

  1. The Treasury report is required by Congress to identify countries that are trying to artificially manage the value of their currency to gain a trade advantage, for example by keeping the exchange rate low to promote cheaper exports
  2. Countries remain on the list for two report cycles to help ensure that any improvement in performance versus the criteria is durable and is not due to temporary factors

Impact on India

  1. Treasury called for all the countries on the list to implement economic reforms to address their surpluses
  2. India would have to undertake reforms to address large trade imbalance with USA
Foreign Policy Watch: India-United States
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