India has set an example in publicizing its interventions in foreign exchange markets, the US Treasury Department said on Friday adding that New Delhi should allow the exchange rate to move more flexibly to reflect the fundamentals of the economy.
“The (Indian) authorities should allow a flexible exchange rate to reflect economic fundamentals, limit foreign exchange intervention in volatile market conditions, and avoid accumulating additional revenue,” he said.
“As the economy recovers, authorities must continue to make structural changes that can help improve productivity and livelihoods, while supporting inclusive and sustainable economic growth,” said Treasury.
In its annual report to Congress on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, the Treasury reviewed and reviewed the policies of its major trading partners, which included more than 80 percent of its foreign trade in goods and services. , between four quarters until June 2021.
In accordance with the Omnibus Trade and Competitiveness Act of 1988 (Act 1988), the Report concludes that no major US trading partner has falsified the exchange rate between his currency and the US dollar for the purpose of preventing effective balance of payments or improper earnings. competitive advantage in international trade.
However, it found that 12 economies authorize inclusion in the Monitoring Department’s Monitoring List of major trading partners who deserve the most attention in their spending: China, Japan, Korea, Germany, Ireland, Italy, India, Malaysia, Singapore, Thailand, Mexico, and Switzerland . Everyone outside of Switzerland was on the watch list for the April 2021 report.
“India has set an example in publishing its foreign exchange market interventions, both monthly purchases and sales and earnings, with a two-month deficit. “In the 12 months to June 2021, the intervention reached USD 131 billion, or 4.6 percent of GDP,” he said.
“The RBI bought large items between July 2020 and February 2021, which was followed by smaller sales in March and April this year as India’s second outbreak was delayed and the outflow of external portfolio deteriorated,” he said.
Noting that India has been fighting a double outbreak of COVID-19 since the start of the global epidemic in March 2020, Treasury said India’s second major outbreak in the second quarter of 2021 has had a significant impact on growth.
With cases falling sharply since the peak of May at the end of October, high-frequency indicators suggest that the economy has been growing rapidly since the start of the third quarter, the report said.
The vaccination rate has grown since mid-June, with 24 percent of Indians being fully vaccinated since the end of October 2021. Following the relaxation of the monetary policy response to the epidemic, the Indian government plans a 6.8 percent GDP deficit at the central government’s fiscal year. -2022 (from March 2022), following a 9.3 percent GDP deficit in FY 2021.
The Reserve Bank of India (RBI) reduced its policy rate by 115 points in the first half of 2020, and remains at 4 percent from May 2020.
According to the report, the gross domestic product of goods and services in India and the United States was USD 40 billion in four quarters until June 2021, rising sharply from its fixed level estimated at USD 30 billion from 2013 to 2019. Increased trade revenue came in handy. after U.S. imports of Indian goods and continuous imports of Indian services, while your US exports both declined due to India’s weak domestic demand, it said.