From UPSC perspective, the following things are important :
Prelims level : Currency Monitoring Watchlist
Mains level : Impact of the move
- The US administration under Trump has removed India from its currency monitoring watchlist.
Countries in the list
- India, alongside China, Japan, Germany, Switzerland and South Korea, was placed in the bi-annual currency watch list in October last year.
- While India and Switzerland have not been mentioned in the latest list, the US has added Ireland, Italy, Malaysia, Singapore and Vietnam to the list, with China continuing to figure in it.
- While the designation of a country as a currency manipulator does not immediately attract any penalties, it tends to dent the confidence about a country in the global financial markets.
- Countries with a current-account surplus equivalent to 2 per cent of gross-domestic product are eligible for the list, according to modifications made in the new list, down from 3 per cent earlier.
- Other thresholds include repeated intervention in the currency markets and a trade surplus with the US of at least $20 billion
Why is this significant?
- Tweaks in currency policy has been used by the Trump administration to browbeat countries that, from Washington’s perspective, have hurt American businesses and consumers.
- For India, this comes amid the ongoing trade spat between Washington and New Delhi.
- Trump has repeatedly claimed that India is a “tariff king” and imposes “tremendously high” tariffs on American products.