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India Is No More in USA’s Currency Monitoring List


  • The US Department of Treasury has removed India from its Currency Monitoring List of major trading partners, joining Italy, Mexico, Thailand, and Vietnam on the list.
  • India was on the list for the previous two years.


GS Paper 3: Effects of liberalisation on the economy (post 1991 changes), changes in industrial policy and their effects on industrial growth, Effect of Policies & Politics of Countries on India’s Interests

Mains Question

What exactly is currency manipulation? What are the implications for India of being removed from the US Treasury’s currency manipulation monitoring list? (150 Words)

Currency Monitoring List 

  • The Currency Monitoring List of the United States’ major trading partners is a list of countries that should pay close attention to their currency practises and macroeconomic policies.
  • It is essentially a watchlist of countries with potentially “questionable foreign exchange policies” and “currency manipulation.”
  • The US government assigns the currency manipulator label to countries that it believes are engaging in unfair currency practises by deliberately devaluing their currency against the dollar.
    • The practise would imply that the country in question is artificially depreciating its currency in order to gain an unfair advantage over others.

Inclusion criteria for the list

  • A country’s inclusion in the list is based on three key criteria: o a significant bilateral trade surplus (equivalent to $20 billion) with the United States; o a material current account surplus (equivalent to 2% of GDP); and o persistent one-sided intervention in the foreign exchange market.
  • Countries are kept on the list for two report cycles to ensure that any improvements in the country’s performance are not due to temporary factors.
  • A country that meets two of the three criteria is added to the Watch List. The Treasury classifies countries that meet all three criteria as currency manipulators.

What if a country is included on the list?

  • Designation of a country as a currency manipulator does not immediately result in penalties; however, it tends to erode a country’s confidence in global financial markets.

The inclusion of India on the list

  • India was last on the currency watchlist in October 2018, but it was removed in May 2019.
  • India was added to the list again in December 2020. It had been on the list since then, only to be removed recently.
  • Indian policymakers criticised India’s inclusion on the list, claiming that the move violated the RBI’s policy space.
    • The RBI is mandated to provide currency stability, so central banks buy and sell foreign currency.
  • According to India, the RBI is not accumulating reserves and its activity in the foreign exchange market is perfectly balanced.

Why was India included on this list?

  • According to the US Department of Treasury, India met the criteria for inclusion in the list in December 2020 and continued to do so during the April 2021 review.
  • For example, the US cited the following reasons for India’s inclusion in April 2021: o India’s trade surplus with the US increased by nearly $5 billion in fiscal year 2020/21.
    • India’s bilateral trade surplus with the US in goods was $24 billion in 2020, with a $8 billion trade surplus in services.
    • The report also stated that the RBI’s dollar purchases totaled 5% of GDP, exceeding the 2% threshold.
  • The US Department of Treasury has removed India, along with four other countries, from the Currency Monitoring List.
  • The countries that have been removed from the list have met only one of three criteria for two consecutive reports.
  • Following the removal of five states, the remaining seven economies are China, Japan, Korea, Germany, Malaysia, Singapore, and Taiwan, which have remained on the list and are part of the current monitoring list.

February 2024