India urged China against devaluation of its currency, yuan in the larger interest of the region in times of global economic turmoil. Taking a dig at the world’s second largest economy, Prime Minister Narendra Modi at an IMF conference on Saturday said that India has never devalued its exchange rate to gain in trade at the expense of its partners.
“We have never tried to gain in trade at the expense of our partners. We do not follow 'beggar thy neighbour' macroeconomic policies. We have never undervalued our exchange rate," said Modi addressing a conference on Advancing Asia, co-hosted by India and IMF. He also said that India was adding to world and Asian demand by running current account deficits.
China has been devaluing yuan to gain export competitiveness to deal with dollar flight in the times of global weakness. China devalued yuan on February 29 to 6.6 to the dollar.
Modi went on to say that India was a haven of macroeconomic stability and a beacon of hope, dynamism and opportunity amid global problems and has dispelled the myth that democracy and rapid economic growth cannot go together.
Besides, chief economic adviser Arvind Subramanian pressed China to move from a surplus to a current account deficit economy to facilitate the current growth model.
“China needs to become a current account deficit country to partly facilitate trade led model of growth for other countries and not just India,” said Subramanian.
India’s exports fell for the 14th straight month in January on account of persistent weakness in the global demand and lower valuation of commodity priced led by oil. January exports fell 13.6% year on year, while imports shrank 11.01%, according to data released by the ministry of commerce and industry.
On China slowdown, the chief economic adviser said that there was a need for a coordinated fiscal response at the global level to address it. “The puzzle is not China slowing down, the puzzle is why it didn’t slowdown earlier
Subramanian also raised concerns over recent comments by Donald Trump, the Republican Party’s frontrunner for the US presidential elections on scrapping the H1 B Visa and its impact on the Indian growth model. “His comments are very worrying about our model of growth,” Subramanian said.
As India prepares to become a regional manufacturing hub through the Make in India campaign, Subramanian said that India can grow at 8 per cent to 10 per cent through a combination of high exports and a focus on manufacturing as well as services.
“India can’t deviate from the historical experience and grow at eight per cent without rapid exports and just depending on domestic demand,” said Subramanian.
He further said that it is possible to harness the Make in India campaign but instead of growth being led just by manufacturing, it has to be through a combination of manufacturing and services. “We can have a uniquely India model, which is export-led but not just uniquely focused on manufacturing,” he said at the second day of the three day event.
On macroeconomic stability, Subramanian said the government is taking a number of steps to accelerate growth and States are competing with each other, which has added to the dynamism of the Indian economy.