October 18 2017
WASHINGTON: There has been a notable rise in India's net foreign exchange purchases, the US Department of Treasury has said in its report on forex policies of its major trading partners. In the report given to the US Congress, the department said it will closely track India's foreign exchange and macroeconomic policies.
"Over the first half of 2017, there has been a notable increase in the scale and persistence of India's net foreign exchange purchases, which have risen to around $42 billion (1.8 per cent of Gross Domestic Product) over the four quarters through June 2017," the Treasury Department said in its latest half-yearly report to the Congress.
Foreign exchange is the exchange of one currency for another or the conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around-the-clock.
India has a significant bilateral goods trade surplus with the US, totalling $23 billion over the four quarters through June 2017.
In its report, the Treasury Department said that it assesses net purchases of foreign currency, conducted repeatedly, totalling in excess of 2 per cent of an economy's GDP over a period of 12 months to be persistent, one-sided intervention.
Switzerland and Brazil meet this criterion for the four quarters ending June 2017, as per the US' estimates.
"India is very close to meeting this criterion for the four quarters ending June 2017, with net purchases of foreign currency slightly below 2 per cent of GDP," it said.
The report said China has an extremely large and persistent bilateral trade surplus with the US, by far the largest among any of the US' major trading partners, with the goods trade surplus standing at $357 billion over the four quarters through June 2017.
China continues to pursue a wide array of policies that limit market access for imported goods and services, and maintains a restrictive investment regime that keeps out foreign investors, the Treasury Department said in its report.
In comparison to the extremely large and persistent bilateral trade imbalance, China's multilateral external position has undergone greater adjustment in recent years, with its current account surplus falling to 1.4 per cent of GDP in the first half of 2017 from 1.8 per cent of GDP in 2016, and down from 10 per cent of GDP in 2007, the report said.
"Treasury remains concerned by the lack of progress made in reducing the bilateral trade surplus with the US," the report said.
The department said President Donald Trump remains deeply concerned by the significant imbalances in the global economy. Bilateral trade imbalances with many of our major trading partners have grown to very large levels, it said, adding that more broadly, current account surpluses in several major trading partners have not only been large but unusually persistent over the last decade.