India is one of 11 countries on the US Treasury’s ‘Monitoring List’ with regard to their currency practices as per the April 2021 edition of the semi-annual report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States,[1] the first report of the Biden administration. India was also on the list in the previous report by the US Treasury Department delivered to Congress which reviewed and assessed the policies of 20 major US trading partners during the four quarters through December 2020.[2]
The current report states that the Indian authorities should allow the exchange rate to move to reflect economic fundamentals, limit foreign exchange intervention to circumstances of disorderly market conditions, and refrain from excessive reserve accumulation.[3] Furthermore, Reserve Bank of India (RBI) carried out higher dollar purchases of close to 5% of GDP largely on account of huge capital inflows, which is higher than its threshold of 2% of GDP.[4]
