The U.S. Treasury Department recently announced its decision to remove India and Switzerland from its currency monitoring watch list of major trading partners. The watch list is part of the semi-annual report that the Department issues. It serves as a mechanism to track developments in the international economies and oversee foreign exchange rates. This list initially included India along with major economies such as China, Japan, Germany, Switzerland, and South Korea.
These countries were under scrutiny due to potential irregularities in their foreign exchange policies. While inclusion in the list holds no severe penalties or sanctions, it certainly impacts the country’s global financial image in the financial markets. This effect is specifically noticeable in terms of foreign exchange policies, including undervaluation of currencies to gain export advantages.
China: A Special Case
Interestingly, China continues to be on the monitoring list due to its “persistently weak currency”. While most countries have been removed, China’s consistent financial stance makes it a unique case, warranting continuous monitoring.
The Criteria for Removal: Why India Made the Cut?
After noting certain key developments and measures taken by India, the U.S decided to remove the country from its currency monitoring list. These measures, aimed at curbing concerns surrounding foreign exchange irregularities, have demonstrated a promising change in fiscal behavior. Another prominent reason was India’s significant bilateral surplus with the United States.
Financial Facts About India
| Fact | Value |
|---|---|
| Bilateral Surplus with the US | $20 billion (approx) |
| Reduction in import tariff on Harley-Davidson motorcycles | From 100% to 50% |
| Global Financial Image | Improving steadily after removal from US currency monitoring list |
The Significance of this Move for India: A Positive Development
India’s removal from the currency watch list is a significant stride for the country. Had it continued to feature on the list, the country could have ultimately been labeled as a currency manipulator. Such a tag is usually given to countries that intentionally manipulate their currency exchange rate for gaining an unfair competitive advantage in international trade.
This landmark move by the U.S opens doors to smoother negotiations in Indo-US bilateral trade relations and can help reduce trade-related differences. It is especially beneficial concerning the Generalized System of Preferences (GSP).
Another crucial aspect is how this move complements Indian government’s recent decisions, such as slashing the import tariff on Harley-Davidson motorcycles from 100% to 50%. This decision helps negate the USA’s previous claim on India as a “Tariff King” and the accusation that it imposes “tremendously high” tariffs on American products. Therefore, besides infusing a degree of harmony in trade relations, this change also significantly improves India’s global financial image in the international financial market.
