India on US Treasury's Radar Amid Rising Foreign Exchange Reserves

A reduction in fuel and other general imports during the COVID-19 pandemic has led to a rise in India's foreign exchange reserves, which stood at $579.34 billion as of 4 December.

The US Department of the Treasury has mentioned that India is among those nations that need to be monitored for currency practices.

The report comes as the foreign currency component in India's total foreign exchange reserves topped $533 billion in the first week of December in comparison with $439 billion in April.

The total forex reserves currently possessed by the Reserve Bank of India stands at $579 billion. This total foreign exchange reserve includes gold and other assets like bonds, while the foreign currency component (dollar holdings) in the total reserve is $533 billion. 

The US Treasury has put 10 countries on the currency monitoring list, while designating Vietnam and Switzerland as currency manipulators, accusing the two nations of deliberately seeking to devalue their currencies against the dollar to gain the upper hand in trading.

The other economies put on the currency radar by the US Treasury are China, Japan, South Korea, Germany, Italy, Singapore, Malaysia, Taiwan, and Thailand.   

Washington keeps a tab on its trading partners for currency manipulation to restrain them from gaining a competitive edge in exports. The US Treasury has three major yardsticks to measure whether a trading partner is engaging in currency manipulation.

First, if the partner country has a trade surplus of over $20 billion with the US; second, if the partner country has a current account surplus of three percent, and lastly, if the partner country's foreign currency purchases have exceeded 2 percent of their gross domestic product in the last 12 months.