The U.S. Treasury Department’s semi-annual report on the macroeconomic and foreign exchange policies of major trading partners has put India on the watchlist of countries being monitored for currency manipulation. This comes after the Indian central bank stepped up purchases of foreign currency as portfolio flows surged in the second half of the year.
The US has for the third time placed India on its currency manipulator watch list.
The move was disclosed in the US Treasury’s semi-annual currency manipulation report. It labeled Switzerland and Vietnam as currency manipulators and added Taiwan, Thailand, and India to the seven others already on the watch list. Those already under watch are China, Japan, Korea, Germany, Italy, Singapore, and Malaysia.
The U.S. Treasury uses three benchmarks to judge currency manipulators:
- A bilateral trade surplus with the U.S. of more than $20 billion.
- A current account surplus of at least 3% of GDP.
- Net purchases of foreign currency of 2% of GDP over a 12-month period.
India breached the first and the third benchmarks. On the second, on a four-quarter basis, the country’s current account surplus remained below the threshold level.