India out of US currency manipulator watch list; here's why it means little

The inclusion of a country on this list is merely a pressure tactic, mainly targeted at China, say experts

India is not on the US currency manipulator watch list any more. Is that really a great piece of news implying some benefits for the country? Not very much, say experts. India’s exclusion from this list hardly means benefits, just as its inclusion a year ago hardly meant harm.
 
According to experts, a country’s inclusion to the watch list is merely a pressure tactic, mainly targeted at China. Interestingly, the US has not found any country to be a currency manipulator, not even China. But China now features on the watch list, along with eight others, even as the reference to India has been dropped.

 
A year ago, India had been put on the watch list on technical grounds — it, apparently, had huge amounts of accumulated foreign exchange reserves. When a country hordes US dollars, it weakens its own domestic currency. So, the notion of currency manipulation stems from that.
 

Now, the other two reasons for which India had been included on the list — running a large bilateral surplus and having a large current account surplus with the US — were analytically incorrect, experts say.
 
Of course, hoarding of the US dollar is a different aspect; India had to do it for its own hygiene rather than for gaining a trade surplus with the US. Of course, such a surplus could be seen as a side effect.

 
When it comes to China, though, these currency manipulation tactics make sense. China suppressed its currency’s appreciation through pegged intervention.
 
“The exclusion (of India from the watch list) is good in the sense that the US will now not breathe down the country’s neck. The inclusion was just a hygiene check, and nothing much to start with,” says Soumyajit Niyogi, associate director, India Ratings and Research.
 
The chief economist of a private sector bank who does not wish to be named says the inclusion was downright absurd. And, India really did not lose anything because of its inclusion on the watch list. Some trade restrictions were imposed on India, but they were for other reasons, mainly retaliatory in nature. The exclusion, does not mean any benefits, either, but it irons out some creases in trade talks.